For a small business owner, managing the financial side of the business is quite challenging. Usually, many small business owners spend their time on running the daily operations of their small business, and have no or little time to manage their financial side of the business.
However, understanding and managing your business’ financial side can have a very positive effect on your small business’ success. Here we are going to elaborate some of the basic steps that will help you in managing your business financials.
- Set up Bookkeeping
The first step on the way to managing your business financials is to set up bookkeeping of all financials. There are many easy-to-use and affordable software programs, such as QuickBooks, that will allow you to enter and categorize your financial records and create accurate reports.
You’ll have access to many helpful financial reports which include profit and loss, revenue, cash flow projections, expenses and balance sheets and so on. These reports exactly show how your business is currently doing. You can set up and manage the software yourself, or also you can hire a certified bookkeeper. By getting financial reports, you will have the expertise to plan a better future for your small business.
- Stay Updated on Cash Flow
It is good to check your cash flow on a regular basis. The perfect way to do it is as follows:
- Take a look at your bank account balance.
- Print a cash flow document showing upcoming sales due in a specific time frame and expenses/payments due during the same time.
- Make certain that your bank account balance and incoming revenue will be higher than the payments/expenses. If not, you may have to regulate the payment timing if possible.
- Evaluate Income and Expenses
A key to financial management is to add all your business financial records, which include business earnings and the money it spends to your bookkeeping software. You can then create reports that can help you overview and understand how much the gross income is reduced by the cost of products and other expenses. This reveals your net income and keeps you from viewing earnings at an erroneous level.
- Tax Savings Plan
One good thing is to talk to your tax consultant and get an outline of taxes that your business will owe, and then find out strategies to reduce your taxes. For instance, before the end of the tax year, you can reduce your tax costs by way of making more purchases of items your business needs, which include equipment, and other tools, pay some payments before time and delay depositing income checks into your bank account until next year. You can save tax payments by reducing taxable income.
- Define Profit Percentage
One more essential financial step that you need to take on the way to manage the financial side of your business is to understand what your actual profit percentage is. For making reports that reveal business’ gross income minus your expenses and total costs to observe how much percent of gross income is bottom line profit. By understanding your actual profit percentage, you can plan to manage your business financials in the future. It will also help you to see if your business is meeting its objectives as well as look for better efficiency to improve your profits.
Following these tips will help you know where your business is standing and how it is currently doing. You can also manage the financial side of your business sensibly. Take your first step to a better tomorrow.