Working hard on something you love becomes business success. However, it doesn’t necessarily mean you love balancing the financials. Accounting is crucially important to your success when first starting up and as your business grows.
The following are some tips to help you manage your finances successfully to ensure your businesses longevity:
Understand your financial story
You should understand each figure in your reports or statements when looking at your financials. While you don't need to know every complicated detail of business accounting, it is helpful to at least know basic accounting terms and practices. Including the following important statements:
The Balance Sheet: a brief look at your finances (assets and liabilities) on a specific day.
The Income Statement: shows the business's progress and profit in a set period of time.
The Cash Flow Statement: illustrates how changes in both the Balance Sheet and Income Statement affect cash.
Accounting for your business doesn't have to take a large amount of your time. It can be quick and simple if you are equipped with the right team and tools. Therefore, you can focus on your business journey.
Keep up-to-date records
You are more likely to make educated and informed decisions when your accounting is completed and up to date. Therefore, it is highly important that each week you set aside time to go over and update your finances. This is why we strongly recommend cloud accounting software such as Xero or QuickBooks.
Using the appropriate tools, this shouldn't take longer than a few minutes each day. Up to date records create and maintain a solid look at the progress of your business, which allows you to make judgements such as if you can pay both yourself and your employees this month. Revenues, expenses and business costs need to be recorded as they happen, therefore a few minutes a day or week can save you hours in the future.
Create and maintain a budget
Have a go at plotting your expected income and expenses for the future. This allows you to foresee your future cash flow and make decisions based on it. Creating a monthly budget for a financial year is recommended. Compare your planned figures against the real ones as they happen. You can both monitor your actual progress against your plan, and adjust it to improve performance in the future.
For more information please contact Melbourne Tax Advisory on 1300 942 230.
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42 Villiers Street, North Melbourne