How To Organise Your Business’ Finances
Getting into business for personal gain is a big deal. Youll have a lengthy checklist and also adorn varying hats occasionally.
Its more of a hobby if your business isnt profitable. Properly organising and managing your small business finances can lead to successful dealings and help you attain your profit targets.
Just like you conduct personal finance, you can also organise your small business finances in several ways depending on your targets.
Organising Your Business’ Finances and Maximising Profits
1. Start Tracking Your Income
Its vital to track your income; to know how much you make. You can decide to track your income every day, weekly or monthly, to understand better the amount of money youre making.
You can use a spreadsheet to keep tabs on your income and break it down into groups that stand for the varying stream of revenue your business has.
Invoicing software for book-keeping can also come in handy.
Tracking your income enables you to watch things better and see if the numbers fluctuate and how they do.
Therefore, start keeping tabs on your income frequently if you have a particular income target.
2. Create a Business Checking Account
Separate your personal finance from your business financial structure immediately once your business earns income.
Track profits and expenses and categorise them into a company or personal accounts. Youll find it easier when dealing with taxes, and it will also help organise your finances properly.
You can open a business bank account if you have an Employer Identification Number (EIN).
You can open a business bank account if you have an Employer Identification Number (EIN).
Alternatively, you can open a personal account and use it as a business account. Please note that every business earning must be filtered via this account, and pay each expense through the account.
Get a business credit card for making transactions to that account. Youll get a bank statement every month and track your funds.
Click here to know how you can close your old accounts.
3. Schedule Time and Be Organised
Put aside time every month or week to organise your financesscanning receipts, paying bills, entering data into your accounting software, invoicing, scrutinising financial reports, collections, and others.
Allocate this day on your calendar and handle it as a priority. Many people suggest putting aside fifteen to sixty minutes weekly, but thats dependent on your preferences.
You can also go for batch process finances, where you set aside half a day every month to update personal and business records and evaluate your investment portfolio.
You must have business organisation strategies to keep your finances in order. In other words, you incur losses if there is no system in place.
4. Allocate Tax Money
Work with your accountant to tally money youve made before and after interest (EBIT) every month.
EBIT is the money youve made minus your operating costs. Increase EBIT by 25 to 30% and then transfer that amount into your money market account or business savings.
The amount transferred should cover the local and state income taxes, together with self-employment taxes.
Note that the self-employment taxes paid usually varies, and you should therefore consult with your tax advisor. Youll have cash on hand to make periodic tax payments when you put money aside every month.
5. Track Your Expenses
As a business owner, you have essential costs that you must meet, so you must track your expenses.
These expenses must be met if youll run your business successfully. Moreover, some expenses are usually deductible when filing taxes. This is why monitoring your costs helps in managing your finances better.
Like tracking your income, bookkeeping software is available to help review and monitor your expenses. You could research some of the best bookkeeping software and choose one depending on your needs and preferences.
An essential step in managing your business more efficiently is scrutiny. For instance, there are some instances when hiring freelancers is more economical than getting full-time employees on board.
Depending on the nature of your business, make sure youre getting the best possible deal thatll ensure more profits for your business and not incur losses.
6. Determine How Youll Receive Your Payments
A seamless payment process is the dream of every business owner. Thats why youll need to define the payment methods youll accept in advance.
Making this decision relies on the operation mode of your business. If you are a service provider, sending invoices regularly may be the best way to go.
Likewise, accepting credit card payments or setting up cart options on your website is ideal for selling products.
Either way, go through all the options available and, depending on the charges, find the option that works best for you.
Start Organising Your Business Finances Today
These fundamental steps will assist you in monitoring and organising your small business finances better. You can try all of them, stick to those that work for you and drop those that dont work.
Other aspects that can help your business become more organised include acquiring accounting software, hiring an accountant or tax professional, creating a business budget or making contributions to a Roth.