Owning a small business can be incredibly fulfilling. No boss, flexible work hours, and the satisfaction of seeing your products or services positively impact your clients. However, business ownership also has its difficulties. Many Australian small business owners find one of the biggest challenges is managing their finances!
Here are four top tips to better handle your small business finances and mitigate the impact of seasonal fluctuations.
#1: Ensure you have separate personal and business banking accounts
At the beginning of your business journey, it might seem convenient to combine your finances into one single account. However, as your business grows, this can create unnecessary confusion and complications. By keeping your personal and business accounts separate, you can achieve a clearer and more organised financial picture:
- Keep better track of your money: a separate business account simplifies your business income and expense tracking, making tax time easier and reducing the risk of errors.
- Enhance your credibility: a clearly identifiable business account looks more professional and shows your customers, suppliers and partners that your business is financially responsible.
- Protect your assets: clearly designated business funds helps to protect your personal assets in case of business lawsuits or financial difficulties.
- Set yourself up to secure financing: maintaining separate bank accounts can also make it easier for small business owners to secure financing. Lenders typically require clear financial records, and a dedicated business account helps them assess your creditworthiness, making the loan process smoother.
#2: Establish a filing system for your business finances
A robust filing system is essential to effectively manage your finances, stay compliant, and make informed business decisions. Whether it is digital or paper, an organised system helps you track your income, expenses, and cash flow and simplifies adherence to Australian tax laws and regulations.
Most importantly, accurate financial records are crucial for business planning and forecasting as they offer valuable insights into your business’s financial performance. You need to fully understand your financial position to identify areas for improvement and spot opportunities for growth.
#3: Find a cloud-based accounting system that works for you
You might already use some form of accounting, even if it’s manual data entry in a spreadsheet or ledger. However, transitioning to a digital, cloud-based solution can offer numerous benefits:
- Increase accuracy: accounting software automates many routine tasks that are prone to errors, ensuring more accurate financial records.
- Improve record-keeping: digital solutions can simplify your income and expense tracking, monitor cash flow, and help you manage taxes, BAS, and bank statement reconciliations.
- Better visibility: many accounting solutions can provide real-time insights into your business’s financial health, allowing for informed decisions and quick responses to market changes.
- Save time: by automating routine tasks with an organised system your valuable time is freed up for other income-generating activities.
- Business planning: having all your data in a cloud-based solution offers valuable insights for future business planning and forecasting
4. Leverage credit cards and loans
Every small business experiences highs and lows. Seasonal fluctuations and cash flow issues are common challenges. Instead of letting these financial pressures overwhelm you, consider using support tools like credit cards and loans.
Credit cards can provide quick financial relief. If you select a card with a good rewards program, there can be additional benefits. However, it’s crucial to pay off the debt quickly to avoid additional financial burdens.
Business loans offer more substantial long-term value. They provide access to capital for covering costs, funding growth, or investing in new equipment or technology.
A business loan can enable you to explore new opportunities, such as entering new markets, launching products, or hiring staff. Unlike a quick fix credit card, the right business loan can be instrumental for growth and increasing your company’s value over the long-term.
“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."
