As a business owner, you know that your finances must be in order. Unfortunately, not all business owners have a finance or money management background. As a result, many small business owners struggle to understand their finances and make better choices to improve the business. Luckily, business owners can simplify their finances to help them understand their money and maintain it. Business owners no longer have to get intimidated by bookkeeping and accounting. Instead, follow these tips to help you simplify your business finances.
Keep Personal and Business Finances Separate
When running a business, it can seem easy to put a business expense on your personal credit card and vice versa. However, not separating your expenses can be a huge mistake that makes managing your personal and business finances more difficult. When you separate your expenses, you can protect your personal finances if you’re sued, which can help ensure the health of your personal finances even if your business isn’t doing well.
Additionally, keeping your different types of finances separate can simplify bookkeeping to help you save time when determining where your money went. Separating these expenses early on can help prevent a ton of headaches and stress, especially during tax season when your business expenses become deductions.
Of course, there are some times when you may not be able to keep your finances separate. For example, if you don’t have business credit, you may have to use your personal credit to apply for a loan for your business. Of course, it’s always best to establish business credit as soon as possible, but using your personal finances to help your business may sometimes be unavoidable.
All businesses have to do some form of invoicing to get paid and pay suppliers, vendors, and partners. If you’re not streamlining your invoices, knowing who owes you money and who you have to pay can get confusing. With an invoice management tool, you can easily create invoices and record payments without the need for bookkeeping skills. This software can also help you set up a process for paying an invoice automatically, so you’ll never have to worry about another angry vendor again.
Categorize Expenses and Revenue
Filtering different expenses into categories can help you understand how much you’re spending on different areas of the business. When you track expenses, try to sort them according to different categories, including marketing, payroll, taxes, and equipment. Depending on the type of business you run, you can create as many categories as necessary to help you understand where your money is going.
As your business grows, you’ll want to pay your invoices from a single source rather than writing one vendor checks and using PayPal for another. In addition, if you centralize all your payments, you can improve your bookkeeping to make it easier to keep track of your spending habits.
Balance the Books
Business owners typically don’t balance their books as often as they should, making accounting even more difficult and tedious. Instead, you should set aside time each week to balance your books, process receipts, and pay invoices. If you’re balancing your books correctly, it shouldn’t take more than a few hours every week to ensure your finances are in good order.
Work with an Accountant
An accountant can help you simplify and understand your business finances. Unfortunately, most small businesses work with accountants only during tax season to ensure they file correctly and get the most out of their returns. However, you can work with an accountant year-round to ensure your accounting processes are simple. In addition, using an accountant can help reduce stress and take one job off your plate, allowing you to focus on other aspects of the business.
Create a Payroll System
If you have employees, payroll is one of the most important parts of your business. Ensuring your employees are paid accurately and on time is a necessity for any business. While payroll might seem simple, it can actually be very complicated, especially for small business owners.
You can handle payroll in-house with payroll software or use a company to handle payroll for you, including calculating withholdings, taxes, and direct deposits. Depending on the type of business you have, working with a payroll company might be the easiest option until you’re able to scale and hire your own accounting department.
Monitor Accounts Receivable
If you can’t receive money, your business can’t make money. Monitoring accounts receivable means counting the money you make, and monitoring your accounts regularly ensures that no one is missing payments. Unfortunately, even though business owners know the importance of accounts receivable, they can still easily forget to invoice clients because they’re focused on other aspects of the business.
Simplifying accounts receivable will ensure you have the cash flow to keep your business going. If you don’t have anyone in-house to monitor this aspect of your business for you, it’s important to set aside time each week to send invoices, record payments, and follow up on unpaid invoices.
Hire a Bookkeeper
Sometimes it’s easier to let someone else track your business finances, especially if you’re busy running other aspects of your business. Luckily, you can find a professional bookkeeper to give your finances the attention they deserve and ensure the financial health of your business. In addition, professional bookkeepers will help you save time to focus on growing the business rather than documenting payments.
Small business owners have a lot on their minds, which is why finances typically fall through the cracks. Unfortunately, if you’re not taking care of your business finances, you can’t take care of the health of your business. Your business needs healthy finances to thrive, so there’s no reason to put off taking proper care of them.
Simplifying your business finances takes work, but there are many ways to streamline your efforts, including automating processes, working with other companies, and hiring a professional bookkeeper to handle the process. Then, once your finances are in order, you can go back to focusing on ideas to help grow your business.
Ashley Nielsen earned a B.S. degree in Business Administration Marketing at Point Loma Nazarene University. She is a freelance writer where she shares knowledge about general business, marketing, lifestyle, wellness or financial tips. During her free time she enjoys being outside, staying active, reading a book, or diving deep into her favorite music.