3 Smart Tips on Money Management For Small Businesses
According to Xero, a firm accounting software platform, poor financial management is the death knell for many small businesses in Australia. Moreover, their recent analysis revealed that financial mismanagement is the cause of 65% of failed firms. Managing your cash should thus be a top priority if you wish to run a financially successful small business.
Cash flow problems and mismanaged finance and accounting processes are some of the main reasons small businesses fail, so SMEs must ensure that they have a sound money management strategy and the right measures to support their business structure, goals, and banking needs.
Read on to learn more about money management and where to find business accountants on Gold Coast.
Why Is Excellent Money Management Important?
Sustainable cash flow is the lifeblood of every fruitful firm, whether it's a start-up or a mature stage of development. It's also critical to any corporate growth goals. Unfortunately, according to a recent Xero survey, cash flow management is one of the main difficulties for 29% of Australian businesses.
Profitable businesses make money, don't squander money on unnecessary items or personnel, and pay their payments and commitments on time.
Understanding your cash flow status and regularly anticipating any changes in your business plan or market conditions.
When you lose sight of your cash, you jeopardise your company's failure. The good news is that by following a few simple, practical tactics, you can keep your expenses under control and build your business without taking huge financial risks.
Suggestions For Money Management
You must first implement a money management strategy before you can use best-practice corporate finance and accounting practises. Start small and make it a part of your regular operations before adding more elements to your firm's accounting procedures.
Here are tips to help you get your money in order:
Keep A Record of Your Expenses
Track your spending by determining how much money you make each month and create a budget based on that figure. You should be able to set aside 100% of your annual revenues to invest in different aspects of your business.
For example, you may spend 50% of your budget on inventory and payroll, 20% on new company equipment or staff, and the remaining 30% on developing your business plan for future growth (such as implementing new marketing campaigns, launching new products, setting up a new online business or a business franchise, for example).
The first step is to determine how you presently spend your earnings. You have more room to invest in your business's growth if you spend 30% on expenditures. Consult a small company financial specialist or small business accountant on the Gold Coast for assistance in building a revenue-spending strategy.
Make Timely Payments on Your Invoices
According to Xero data, 20% of ASX 200 firms pay their taxable invoices late; however, many small businesses are unaware that not paying their bills on time might cost them money.
Many businesses you may be working with may charge you interest if you do not pay your invoices on time. Interest charges for late payments increase the expense of doing business – but they may be avoided.
To prevent overpaying on interest, organise your bills and pay them before they're due. Remember that if you don't keep track of invoice due dates, you're essentially wasting money that might be spent on expanding your firm.
Create A Living For Yourself
Money gained from your business can be used for personal and commercial purposes. You're mixing your business and personal accounts if you don't pay yourself a salary and instead take money from your business income when you need it. This makes it more difficult to keep track of your business expenditures.
Paying yourself is one of the most efficient ways to keep business and personal expenditures separate. Your income doesn't have to be enormous or even the bare minimum. This is the first basic step in establishing good money management practises for many small companies.
Any business owner should take time to educate themselves. Learning the core skills necessary to operate a small business, such as simple accounting chores, applying for a loan, and creating financial statements, may help small business owners establish a stable financial future and avoid collapse. In addition to knowledge, staying organised is an important part of good money management. Of course, it would also help to consult with a small business accountant.
At New Wave Accounting, we provide end-to-end accounting and bookkeeping services that help firms develop and flourish, as one of the leading business accountants on the Gold Coast. We know small companies because we've worked with over 600 across various sectors. Contact us for more information!