Running a small business requires basic understanding of managing finances, doing simple accounting work drafting financial statements. Stability is one of the pivotal aspects that can help you balance cash flow and achieve the targeted goals with ease.
However, most small businesses in Australia crash because of poor financial management. If you are not tracking your financial information on a regular basis, you will find difficulties at the end of the account year.
So, we are sharing 7 great tips that will help you manage finances to operate your small business without any hindrance.
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Separate Funds for Personal Use
This is one of the crucial tips that will make things easy for you. Never merge your business funds with personal one. Mixing both funds can affect your company’s revenue rate and cas flow.
In addition to this, if the business has debt at the starting phase, it will become your debt. This can make it harder to reconcile the financial records and your business can collapse as well.
Pro tip: Use separate bank account for your business and personal use.
Pay Off Your Debt
A good business owner never keeps a pressure of debt on his shoulders. So, it is good to create a feasible plan for repayment to pay off all the debt as soon as possible. Make sure you pay attention to the debt agreements that have the highest rate of interest. This is one of important tips to manage your small business finances.
Manage Your Financial Books
The Australian Taxation office wants you to manage your business records in an organised manner for at least five years. Make sure you have the following paperwork:
- Statements from your credit cards and business accounts
- Receipts and invoices for goods and services
- Employees’ payment and PAYG tax
- Register of assets and stocktake details.
You can also find out business, finances and management advice for your start-up so that you can stay consistent throughout the journey.
Focus on Good Business Credit
As your business grows, you may want to buy a spacious office space or require additional insurance policies or apply for loans to operate your business. If you have a poor business credit, you might not get approval for a loan and other acquisitions.
To keep good credit, make sure you pay off all your debt funding as we mentioned about in the article. Make sure you maintain a good credit score and do not take out financial assistance with interest rates that are higher than your budget.
A well-organised Billing Strategy
It is common to face a problem when your clients or customers delay the payment. To cope with this problem, you need to create a good billing strategy. Instead of sending invoices over and over again, change the payment policy to 2/10 Net 30. It means if the customer pays the invoice within 10 days, they will get a 2 per cent of discount on the total bill.
This is one of the best strategies to clear the payments from chronic late-paying clients. Doing this will help you maintain a balanced cashflow.
If you are new in the entrepreneurial world and want to start-up your own venture, have a look at the list of fastest growing small businesses in Australia and make your decision wisely.
Maintain a Cash Reserve
It is like your business’s saving account that can help you in emergencies. This can be vital for all small businesses because you never know when an emergency come across you. So, it is good to add some part of your profits in cash reserve and use it for uncertain events.
Pay Monthly Tax
If you are finding obstacles in paying your quarterly tax payments, spread it out and make monthly payments. This will reduce the financial burden and help you pay tax on time without any delay. The Australian Taxation Office also suggests you to pay your tax on time and monthly payments are more convenient for small businesses.
Running a small business is an art. Managing business operations and finances are the most difficult aspects Luckily, the tips mentioned above in the article will help you manage your finances and stay on the top whenever you want to grow your business in Australia.