Accounting. Finances. Balance Sheets. These terms are enough to make an entrepreneur shudder. But for any business to be successful, there needs to be a tight control over finances. For many business owners, it comes as a shock when their financial position is presented to them. However, if you put an accounting system in place right from the beginning, you’ll manage to avoid most unwelcome surprises. So, take into account (pun intended!) the tips below and help your business thrive.
1. Separate your personal and business finances.
Accounts can get muddled when using a single account for personal and business transactions. This might work in the very beginning, but it’s all too easy to fall into the trap of spending business funds on personal items or vice versa, without even realising it!
We know that you have the best of intentions, but down the line, you might forget what came in and when, and how it was spent and where. An ideal solution is to open up a separate bank account for your business. Sure, it’s not exactly fun to spend a day at the bank setting up an account, but you (and your customers and vendors) will be thankful you did when your business takes off. You’ll also find that having a separate company account gives you peace of mind because you won’t have to hunt through your statements, wondering what transaction belongs where.
2. Outsourcing vs. DIY
As entrepreneurs, we tend to wear many different hats, often at the same time. However, if the option is available and financially viable, consider professional help for your book keeping. Someone with experience will be able to manage your books better and be able to advise you on how to avoid certain pitfalls. Whilst in our personal lives it’s ok for there to be a bit of clutter, untidiness related to your business accounts could have serious consequences, including unpaid bills, breakdown in supplier relationships, potential embarrassment or worse, etc. You don’t want to get caught up in all that nonsense (and we don’t want you, too, either!)
When choosing your outsourcing partner, pick a firm with SME experience as they tend to have the know-how and skills needed to work efficiently with entrepreneurs. In our own business, we decided to outsource all of our accounting a few years back and I can say it has actually saved us money (and headaches).
3. Keep an eye on…
If you needed financial backing or a loan to get your business off the ground, then it’s important to make sure the loan doesn’t get mixed up with your receivables. Otherwise, you might lose sight of what is yours to keep and what needs to be paid back. And we know you’re looking forward to clearing that off the ledger! Your accountant can separate income from borrowed funds for easier referencing.
You know that you want your incoming to be more than your outgoing. To make sure you stay in the black and avoid going into the red, follow up with outstanding payments. That can be a little uncomfortable, but there’s no need to have a nasty confrontation. Instead, start with a ‘gentle reminder’ email and then follow-up with a quick, friendly phone call.
Keep at it until the invoice is paid or alternative arrangements are made. With a polite touch and good-natured attitude, you’ll end up with the money you’re owed and the respect of your clients and vendors. If you are able to, we would suggest requesting payment up front in respect to services and payment on delivery of goods. Accumulated receivables equals tight cash flow and cash flow or lack thereof is the number one reason for business failure. So our best advice is to reduce that risk and collect up front. It will save you a lot in the short and long term.
For the small business owner, finances and accounting are vital components to a company’s success. Whilst they are not the ‘be all and end all’ of your product or service, the picture is incomplete without them in place. But there’s no need to feel like you can’t tackle these issues. With some key systems in place, and a little professional assistance, your business’s finances will be more organised than an IKEA junkie!
To understand more about your specific business or idea, contact Amanda Perry at Vital Corporate Solutions www.vitaluae.com
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