YOUR business skills may centre on the manufacture or selling of a product or service, but unless you are 100% on top of your business finances, you may never know how well or poorly your company is operating, until, perhaps, it is too late.
The actual cash availability in your business is one of the most important aspects to understand because it dictates whether you are operating next week when you have sufficient cash, or closing down the business, because you have run out.
One of the biggest challenges for every entrepreneur is to manage both the business income and the necessary expenses. It doesn’t matter what size of business that you operate, keeping clear and understandable records is absolutely critical for you to know and understand the financial state of your business at any time, not just when the bank manager asks to see your latest business financial report.
Should you have any need to access any sort of financing in the future, you will need to present up-to-date financial records so that a lender can establish the level of risk that you present to their money.
Should you not be an expert in managing the income and expenses for your company, you may choose to employ a professional accountant to set up your records and manage every single transaction. The more qualified the accountant, the more they are likely to charge you for this service. You may be able to access students who are looking to become qualified accountants later, to look after your finances, at preferential rates.
The hours that an entrepreneur or business owner works during the course of a week, can often be extensive and it may not be long before you offer the excuse that you do not have time to manage your finances efficiently. For your business to become successful, knowing and understanding your financial position at any stage is an essential ingredient in planning your business for the future.
You can organise your business finances by using an accountant or bookkeeper, an online facility, or by training someone in your organisation to carry out the task. Whatever decisions you make, you will still be involved with the finances of your business and as the CEO, business owner or self-employed individual, you are responsible for providing professional accounts to your tax department.
To ensure your records are accurate, it is better to separate your business and personal finances so that you know which belongs where. By setting up a method to track your business expenditure, using a specific debit or credit card, for example, tied to your business account, you can keep your personal expenses and payments with your private cards and cheque book.
You can discuss financial matters with your local tax office and they will inform you what percentage of your income needs to be set aside to pay your tax and other bills at the end of the year.
Whether you use online or off-line financial software, you will be tracking your finances in the same manner that is used by the global conglomerates. By setting aside a specific amount of time every week to manage your finances, you will see how hard copies and online paperwork is best used to the advantage of your business.
The key to managing your finances is to stay on top of it all, complete it regularly and then review the transactions so that you understand your business finances from top to bottom.
By Samuel Rosenberg
Samuel Rosenberg is the founder and CEO of Axcel Finance Ltd., the leading regional microfinance institution. Share your thoughts and email your questions to firstname.lastname@example.org