Sound money management is as important to business as it is to individuals. It might be even more important in the business setting given that management decisions affect everyone in the company. A good decision could mean good things for everyone and vice-versa.
Are you new to this whole business thing? Have you been at it a while but still struggle to maintain solid business financials? If you answered ‘yes’ to either question, this post is for you. Here you will read some very helpful tips pertaining to business money management. They are by no means an all-inclusive solution to your problem, but they can provide a firm foundation on which you can build.
Don’t Compromise on Accounting
You’ll never have a thorough understanding of your financials if accounting practices are not up to scratch. Therefore, the first tip is to not compromise on accounting – ever. Forget about handling accounting yourself unless you have an accounting degree. Otherwise, let an expert handle it for you.
If you choose to address accounting by hiring a professional to work in your office, be sure to give that individual and his or her team a solid accounting package. Do not skip on your software or your team may not be able to do the best job possible. It is worth investing in a top-notch package that handles all of your accounting in one place.
Manage Your Debt
Just as poor debt management can destroy an individual’s budget, it can wreak havoc on your business. It is inevitable that you will incur some debt in your pursuit of building a business you can be proud of, but it is never a good idea to allow your company to be controlled by its debt. So learn to manage your debt wisely.
Good debt management covers basic principles like paying off the most expensive debt first, avoiding credit to pay for consumables, and not acquiring debt above and beyond what you can reasonably expect to pay back.
Stay on Top of Your Taxes
If poor debt management is the biggest hindrance to solid company financials, poor tax management comes in a close second. Far too many businesses approach their taxes in the same way individuals do – by waiting until the last minute to even think about them. That’s too late when you owe the taxman money.
A company’s tax strategies might include HMRC Finance options from time to time. For example, you may choose to utilise a VAT loan to pay your current tax bill so that money doesn’t have to come out of your bank account. It is perfectly acceptable to finance taxes for the right reasons and with the right controls in place.
The last thing you want to do is fall behind on your taxes. HMRC is not known for its compassion or leniency, and they will not be impressed by your company no matter how brilliant your business plan might be. The taxman wants to be paid in full and on time. Make sure you comply.
Keep Separate Bank Accounts
Next, maintaining solid financials requires making sure all business revenues are channelled in the right direction. A good strategy for accomplishing this very necessary goal is to keep separate bank accounts covering different kinds of needs.
Establish one bank account for tax monies. Any VAT you collect goes in this account. Any withholding for National Insurance goes into this account as well. Separating tax monies guarantees that they will be there when the tax bill is due.
Keep a second account for payroll. Do not be one of those companies that ends up not having enough cash on payday because everything went into general receipts that have long since been spent. Those kinds of companies do not last long because no one wants to work for them.
You have a third account for general receipts and expenses. If there are any other categories that require special funding, set up separate bank accounts for them as well. Multiple bank accounts may require a bit more bookkeeping, but at least the accounting department will have better control and asset protection over the money.
Establish Companywide Accountability
The final tip is to establish accountability among all staff members whose decisions relate directly to financials. In the accounting department, do not entrust everything to a single person. Otherwise, you are risking potential fraud or theft.
In payroll, divide up the various tasks among multiple employees. In this way, each team member can check the work of the other to make sure there is nothing dodgy going on. The same goes for the billing department and the executive staff. The more accountability you create, the less likely you are to find yourself in a situation in which your business is losing money because the left hand doesn’t know what the right hand is doing.
Maintaining solid financials isn’t rocket science. It is not necessarily easy, though. Maintaining solid financials requires discipline, a willingness to make unpopular choices, and solid accounting practices that are not compromised regardless of circumstances.