Tips to Managing Small Business Finances
Proper management of finances plays a vital role in determining the success of small businesses in Australia. It helps in maintaining a consistent cash flow that reduces the risk of failure and dry spells. Make sure you understand the finances as it can help you in debt management, tax season, raising funds, and much more.
We have compiled some great tips that will help you drive your venture into the direction of growth, prosperity and success.
Let Get Started!
1. Track Your Cashflow
Cashflow is determined as the money that flows or moves into and out of your business on a constant basis. It comes into the venture from customers and clients who buy or avail your products and services. It flows out in the form of expenditure, such as wages, rent, monthly EMI, payments to suppliers, etc. It is important for you to know everything about positive and negative cashflow when managing your finances.
2. Positive Cashflow
When you receive more income as compared you pay out in expenditure. If you have this situation, you will be able to pay bills on time and easily meet unexpected costs.
3. Negative Cashflow
This situation occurs when your expenditure is more than your income. For instance, if you buy new equipment or a payment is due from a customer, then you have to depend on a bank overdraft or even a short-term loan to cover the shortfall of this cashflow.
So, make sure you keep a close eye on your company’s cashflow and prepare a monthly, a quarterly and a yearly report. Always remember that a lack of cash is one of the main reasons why small businesses fail in Australia.
4. Track All Financial Transactions
The most effective way to manage finances is to keep track of all financial transactions that are flowing in and going out of your small venture. Every entrepreneur must choose a fully-featured bookkeeping system to record all the transactions.
Make sure you record everything, including machinery cost, travelling cost, payments to the suppliers, etc. Also, keep the personal expenses separated from the beginning to prevent any ambiguity during the tax season. You can also use apps to manage your business and track all your transactions.
Tip: Do not forget to record purchase orders, customer invoices, payroll cheques, deposit slips and cancelled cheques.
5. Use Cloud Accounting Software
It is good to invest in good cloud accounting software, especially if you are running a small business in Australia. This can help you save cost from hiring a professional accountant. For growing organisations, cloud accounting software is often used with a professional accountant to meet all the accounting and tax obligations.
QuickBooks and Xero are two most popular accounting software tools in the digital market and can perfectly fit for your small business.
6. Prepare for Tax Season
There is no denying that tax season makes a lot of small entrepreneurs feel burdened and anxious with the task of precise reporting and tax submission. If you make a small mistake, you could face losses due to penalties bashed by the ATO. That’s why it is important to hire a trained accountant to help in planning tax on time.
Conclusion
Running a small venture is a demanding job that needs basic knowledge of everything, including financial management. Keep these tips in mind and keep a close track on your expenses and incomes to get better understanding.
