How are your business finances doing? Are you the type of business owner who is on top of your finances, or do you do whatever you can to avoid them? If you’re sleeping on your business’s money management aspect, you may be leaving cash on the table. When you know your business numbers, it will not only make you a better business owner, but it will also save you a lot of money and lose stress.
As an entrepreneur, you may be so busy focussing on all the things you’ve been told to do – marketing, sales, and getting customers. But has anyone told you how important it is to manage your finances within your business?
Many are intimidated by their business’s financial aspect that this is the first task they outsource. You hire a bookkeeper and maybe an accountant to tell you how your business is doing financially, but you don’t know. However, nobody will care about your business as much as you do, so you need to be informed. Don’t give your financial power away and let others make financial decisions for you. Be informed.
Top financial tips to follow in your business:
- Keep separate bank accounts.
Separate your personal bank accounts from your business bank accounts and keep all your business transactions within your business. It is your responsibility as a business owner to keep these records clear and separated from personal finances. Canada Revenue Agency (CRA) has the right to audit your personal and business finances at any time, so make sure you keep clear records of transactions.
- Keep your bookkeeping accurate and current.
One of the first things that businesses should set themselves up with is a reliable financial system. Each transaction in your business needs to be recorded, and it needs to be accurate. Financial records are the first layer of your financial foundation. They must be recorded accurately to build up the other layers.
- Read, use and understand your financial reports.
Use your financial reports to interpret the information that your numbers are telling you. It may not sound straightforward at first, but you can make informed business decisions when you understand how financial reports work.
- Create a business financial plan for the year
When you create a plan for the year, also known as a budget, it plans out the goals you are working towards. You can plan out the number of sales you want to achieve for the year, broken down by month, and plan out the expenses that you are costs related to attain those sales.
Having a plan helps you work towards your goals and make your dreams happen.
- Monitor the business financial plan
The best part of having an established plan is to monitor your goals towards that plan each month. You can identify at an earlier stage of the process if you are overspending in a specific area or unanticipated costs that require you to reduce costs in other areas or various scenarios to ensure you are profitable.
- Manage your cash balances
Cash management is one of the essential parts of running a business. Cash balances need to be monitored to ensure that you can meet your financial obligations at all times. When your financial system is effective and running smoothly, it is easy to manage your cash levels.
Having an effective financial system within your business is imperative to grow and scale your business successfully. Suppose you don’t know what is going on in your business. In that case, you could be losing money unnecessarily and putting your business at risk.
Knowing your business numbers make you a far more effective CEO of your business than ignoring them. When you know your business numbers, you make informed, profitable decisions for your business.
The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.