Good finances are the backbone of every small business. And if you're not applying those same good practices to your business expenses, you're bound to be missing out on some tax benefits, and may be leaving yourself open to extra tax bills at the end of the fiscal year.
So we've put together this simple guide for you to manage your everyday finances to enable business growth.
#1. Separate your business and personal finances
Separating your finances is the single most important step to successfully managing your business finances.
Keeping your business and personal finances separate will help you track your company's progress while avoiding potential tax implications. You can also identify red flags more easily and understand more quickly if your business is starting to struggle.
Most importantly, separated finances means your personal funds will be protected. In the event of your business facing legal issues, you won’t have to worry about your personal assets like your home or your car being seized to repay debts.
Sinan Elver
#2. Create a budget (and stick to it)
Putting together a budget and sticking to it helps you beat financial inconveniences when they appear, and puts revenue in your pocket faster.
A budget will help you track expenses against income, and ensures you're not spending more than you can afford. It will also help you identify any areas where you can save yourself some money, which is always useful for a scaling SME!
Start by creating an operating budget for your business. Input the details of your monthly expenses, including labor costs, office rent, and business materials, to help project revenue for the coming year.
Then, once you've got a clear picture of your outgoings, you can create a long-term budget that extends to intermittent expenses like digital marketing costs, future investments and potential acquisitions.
Laine Redpath
#3. Get a corporate card for your business
Corporate debit cards solve SME digital spending issues. These cards come with card numbers, and you can use them exactly like physical debit cards. They increase your company's power to track money and improve the cash conversion cycle, giving you the power to make business purchases without affecting personal liabilities.
Corporate cards also offer fraud protection, easy online account management and detailed spend tracking, ensuring your spending doesn't impact your company's core business goals.
With a wamo business account, you can issue as many virtual cards as you need, physical cards, empowering your entire team and optimizing business security.
#4. Don't forget to pay yourself!
As the business owner, you pay salaries, wages and bonuses to your employees. But, don't forget to pay yourself!
Draw a salary proportionate to the size of your company and your skills. It's tempting to put profits back into your business, but it's important to have enough saved money to live on, or to pivot in the event of business failure.
#5. Track absolutely everything
Income reporting, down to the smallest detail, seems like a tedious task. But tracking cash flow is one of the best ways to manage your business finances.
By keeping an eye on your business income you'll be able to see which products or services are selling well, and divert more cash flow to focus on those areas. You can also use this information to negotiate better deals with suppliers.
On the flip side, tracking expenses will help you understand where you can save money. Maybe your marketing spend is a little too high? Or your coworking rent is too steep to be sustainable? Identifying areas where you can make small changes can have a major impact on your overall financial health.
Manage your cash flow by follow these steps:
- Separate income by due dates
- Create a table with three columns: Due Date, Income, and Paid
- Easily track due dates this way, and mark each income as it comes in
- Once the income is paid, mark it as PAID
- Create discounts for your clients, say 2% discount, to encourage early or timely payments
Then, to control expenses, split them into 3 categories:
- Unavoidable/necessity
- Nice to have
- Low-return
The "unavoidable/necessity" expenses are the costs you can't do without, like rent, water bills or electricity. They'll always recur, so you should factor them into your long-term plan.
The "nice-to-have" expenses are the costs that you can live without, but that make your life a lot easier. It includes things like new equipment, a larger office that'll make scaling easier, or a bigger marketing spend.
The "low-returns" expenses are the ones where you're not likely to see a lot of financial return. It includes things like software subscriptions that don't directly impact your business and dining with your clients. You could feasibly cut all the "low-returns" expenses from your business without losing out, but that doesn't mean they're not useful sometimes!
With most business accounts, including wamo, your dashboard gives you a clear view of all income and expenses. With a wamo account, you can also choose to set up sub-accounts for different cash flow streams, fee-free, to keep even closer control.
#6. Schedule to organize
Set aside time each week to organize your finances. This keeps you on top of your spending and helps to avoid any nasty surprises.
Depending on your business goals and company situation, this organization may include scanning that week's expense receipts, identifying any overspending, filing financial reports, managing taxes, paying bills and managing invoices. Without managing these tasks, you cannot make any business decisions or understand where your money is going.
We'd suggest allocating at least 30-45 minutes every week, maybe the first post-lunch task on a Friday, to keep your business finances neat and tidy.
Although you can do this yourself, as your business grows it can be helpful to seek outside assistance. Happily, your wamo account can bridge that shift, with easy reports and understandable analytics available right in your wamo dashboard
#7. Seek professional help
If you're starting to feel overwhelmed by your business finances, it's a good idea to seek professional help. An accountant or bookkeeper can help you to create budgets, understand financial statements, and will even recommend ways you can cut costs.
If your business begins to really take off, it can be helpful to bring an accountant on-board, not just intermittently, but every week. Their expertise can help you to enhance your business finances through clever revenue generation, taxation assistance, and complex reporting.
Final thoughts
Managing your finances can feel daunting, and as a business owner we know you've got a lot on your plate already! But delaying decisions because of hazy finances puts a risk to your business.
At wamo, we started out as an SME. Which is why we've designed wamo to be the best possible all-round solution to the specific challenges small businesses face. Our smart business accounts put you in control, freeing you up to focus on the bigger priority: growing your business.
So, ready to get your finances in check? We’d love to help! Open a business account with wamo today - and start growing.
