Businesses become a success because it is something you love and therefore work hard at it. It does no necessarily mean you love balancing the financials. However, accounting is crucially important to your success when first starting up.
The following are some tips to help you manage your finances successfully to ensure your businesses longevity:
1. Understand your financial story
You should know what is behind each figure in your reports or statements when looking at your financials. While you don't need to know every intricate detail of business accounting, it is helpful to at least know basic accounting terms and practices. Including the following important statements:
The Balance Sheet: a brief look at your finances on a specific day.
The Cash Flow Statement: illustrates how changes in both the Balance Sheet and Income Statement affect cash.
The Income Statement: shows the business's progress and profit in a set period of time.
Accounting for your business doesn't have to take a large amount of your time. It can be quick and simple if you are equipped with the right tools. Allowing you to focus on your business journey.
2. Keep up-to-date records
You are more likely to make educated and informed decisions when your accounting is completed and up to date. Therefore it is highly important that each week you set aside time to go over and update your finances.
Using the appropriate tools, this shouldn't take longer than a few minutes each day, but it will be worth it when your business beings acquiring the benefits. Up to date records create and maintain a solid look at the progress of your business, which allows you to make judgements such as if you can pay both yourself and your employees this month. Revenues, expenses and business costs need to be recorded as they happen, therefore a few minutes a day or week can save you hours in the future.
3. Create and maintain a budget
Have a go at plotting your expected income and expenses for the future. This allows you to foresee your future cash flow and make decisions based on it. Creating a monthly budget until the financial year ends can help in doing this. Compare your planned figures against the real ones as they happen. You can both monitor your actual progress against your plan, and adjust it to improve performance in the future.
Don't forgot to prepare your budget for the full financial period - which is usually a year - so any non regular expenses (such as annual insurance premiums, taxation or periodic services expenses) can be factored in as well.