Small Business Finance Fundamentals
-This article was last updated on 20 September 2021-
As a business owner, there are a number of universal truths that you’ll be aware of, such as that one about working hours (the law on maximum weekly working hours – 48 a week – doesn’t apply to business owners), that one about uninterrupted rest breaks (everyone has the right to 20 minutes every 6 hours of work and 11 hours of rest between working days. Except business owners), and that one about holiday entitlement (every worker has the legal right to 5.6 weeks of holiday a year – unless you’re a business owner).
And there’s another kind of universal truth out there that you’ll also be well acquainted with: keeping your finances in order is a bit of a nightmare. Receipts go awol, wages spiral, nasty surprises lurk in dark corners, tax law confounds, and mixing up your Tesco shop with your office supplies order results in small but regular madness.
So fight back against the chaos and consider these 5 classic tips for better expense management, finance control and a simpler life.
Divide and conquer. It’s far too easy to lose track of what you’re spending on if you’re handling all your business expenses and personal expenses through the same account. If you want to avoid confusion, save on working hours and add a layer of simplicity to your tracking of expenses, conduct your transactions separately with different accounts and cards according to whether you’re purchasing box files or bed sheets.
There’s no accounting for bad waste. When accounts get technical, call in a pro. Despite the desire to save on costs and handle complex accounts yourself, this can result in a false economy, where penalties are incurred and opportunities missed. Any accountant worth his or her money will make your investment in them worthwhile, saving you unnecessary costs in the long run.
Give yourself time. As tempting as it may be to time finance reviews in keeping with the tax cycle, no more than a scheduled 15 minutes every week can work wonders. You’ll be able to keep finances organised throughout the year (saving on billable hours for your accountant), develop better insights about your operations, and benefit from being able to make better-informed decisions.
Labour leadership. Your staff is your business’ greatest expense but also its greatest asset. When you spend well on your staff – from the hiring process through to training and wages – you are making a solid investment in your business that will pay dividends. Nevertheless, tracking those costs (overtime, bonuses, sickness and holiday cover) can get complicated, but it is essential to keeping a firm grip on your spending. By having control over your labour costs, you’ll be able to better invest in your staff in the future.
Money flow. Late payments can break a fledgling business, so it’s essential to remain on top of those slow to pay up. In order to keep a hold on your cash flow, maintaining strong lines of communication with your client is key, and you may also wish to explore invoice discounting or invoice factoring as a means of keeping the money coming in.