When it comes to running a small business, organising your finances is utterly crucial to success.

Not only that, when you do it right, all other aspects of running a business become that much easier and more manageable.

Here’s some key steps to help you manage and organise the financial aspects of your small business.

Create a proper business budget and stick to it

This may sound obvious, but it’s surprising how many small businesses don’t budget effectively and then wonder where their money went or why their profits are underwhelming.

The ability to undertake proper business budgeting will not only help you avoid seemingly unforeseen expenses, it will help you control your spending, predict cash flow and profits, and make sure you have a safety buffer for surprise costs.

Basic budgeting involves:

  • Outlining all your expected income and expenses.
  • Categorising expenses (e.g., fixed costs like rent, utilities, variable costs like supplies).
  • Reviewing and updating your budget regularly.

Pro Tip: One of the best ways to get to grips with a budget without reinventing the wheel is to grab an affordable budgeting app. Budgeting apps will lead you through the process of creating a budget and filling in the necessary inputs. With the benefits of automaton and the ability to integrate with your accounting software, a good budgeting app will make this process a breeze.

Separate personal and business finances

This is a big one and will drastically cut down on confusion and financial mismanagement. ALWAYS separate business finances from personal finances.

When it comes time to calculate expenses, identify cash flow, undertake basic bookkeeping, calculate GST, or do your taxes, you’ll be in a world of strife if you muddle up personal and business finances.

It will be a huge task to even know what your true financial position is.

Mixing accounts will create a headache of titanic proportions. Never blend up your finances, including paying for business expenses of a personal card or using your business account for personal reasons.

This is all easily avoided by:

  • Opening a separate business bank account with card access. Or two or three.
  • Opening a business credit card account.
  • Strictly using business accounts for all business transactions without exception.
  • Strictly using your personal cards and accounts for personal needs.

Maintain accurate records

One way to create confusion over your financial situation is to lack proper records. Your record keeping habits need to be immaculate to make sure you know your true position and can undertake accurate reporting and reviews.

Even more importantly, you can accurately do your BAS, GST, payroll, and tax returns.

To make sure you have good record hygiene:

  • Keep detailed records of all transactions.
  • Use good quality accounting software to streamline the process.
  • Keep all receipts in a digital format.
  • Regularly undertake basic bookkeeping.

Manage your invoicing and collecting payments

When it comes to cashflow and the ability to bank profits and pay your expenses, you need to invoice properly and ensure you stay on top of your accounts receivable.

To do this you need to:

  • Issue invoices promptly.
  • Make sure you have multiple payment options and professional and clear invoices,
  • Follow up on payments – using accounting software with reminders can help here.
  • Regularly check on your accounts receivable for late payers.
  • Set clear payment terms and policies.

Track your expenses

You can’t run a tight ship without tracking your expenses properly. Not only do you need to for your own good, you need good records for reporting to the ATO.

Make sure to:

  • Keep receipts for all business expenses.
  • Categorize and track expenses regularly.
  • Use accounting software for proper record keeping and reporting.

Establish a system for payroll

Make sure you have a solid setup and process for payroll. You can’t afford to miss payments or screw up your PAYG.

  • If you have employees, set up a payroll system.
  • Understand tax obligations related to payroll like PAYG.
  • Ensure payslips and payments are made on time.

Understand tax obligations

This one should be a no-brainer. You’re going to have tax obligations in business that can include BAS, GST, PAYG, and tax returns. Make sure you understand your obligations to the ATO in full, lest trouble come your way.

  • Be completely aware of your tax liabilities and deadlines.
  • If you’re a sole trader you’ll have to put aside your expected tax bill throughout the year for EOFY – use a separate bank account for this.
  • Check the ATO website for basic questions and advice.
  • Consult with a tax professional to ensure compliance.

Monitor your cash flow

Cash flow is the lifeblood of your business. Having healthy cash flow means you can cover expenses and have enough liquid cash to pay staff and yourself.

  • Keep an eye on your cash flow regularly. Cash flow reporting in your accounting software is your best bet.
  • Make sure you keep on top of accounts receivable.
  • Anticipate and plan for fluctuations in income and expenses.
  • Don’t overextend yourself such as buying too much stock or overinvesting in growth.

Financial reporting

One of the cornerstones of sound financial management is financial reporting. This lays bare your real financial situation. Reporting can easily be done in your accounting software or by chatting to your bookkeeper.

  • Generate regular financial statements (income statement, balance sheet, cash flow statement).
  • Use these reports to analyse business performance and make predictions.

Build a good emergency fund

Build and maintain a financial cushion for unexpected expenses!

  • An emergency fund can be a parachute in case of slow periods or unforeseen expenses.
  • Put aside regular amounts throughout the year as ‘savings’.

Invest in financial software and technology

One of the beast ways to cover most of the advice we’ve given here is to automate it hrough the use of good tech and software  – especially cloud accounting software.

  • Explore financial management tools and software.
  • Automate repetitive financial tasks when possible.

Seek professional advice

The experts exist for a reason – use them! You should regularly consult with an accountant, bookkeeper or financial advisor to ensure compliance and to receive valuable insights and financial advice.