Financial management is the oxygen for every small business. Here's a simple guide for you to manage your everyday finances to enable business growth.
As a business owner, you always have something on your task list and managing everyday finance is easy to put off for another day. But, neglecting or mismanaging your finances can be costly because not only can it negatively impact your business’ revenue over time, but also your personal financial security.
However, managing finance is no cakewalk either! You have to juggle invoices, track cash flows, manage bookkeeping and do a lot more to ensure your business stays on a healthy footing.
So, how do you make the most of your finances without letting them take over your life? We’ve rounded up 7 of the best to get you started.
1. Separate your business and personal finances
This is probably the most important step in managing your finances.
Keeping your business and personal finances separate will help you track your progress while avoiding potential tax implications. You can also identify red flags more easily and understand if your business is struggling financially.
Most importantly, if you separate finances this way, your personal funds will be protected. In case your business faces legal issues, you won’t have to worry about your personal assets being seized.
2. Create a budget and stick to it
Putting together a budget and sticking to it can help you beat financial inconveniences and let you achieve your revenue faster. A budget helps to track your expenses and makes sure you're not spending more than you can afford. It will also help you identify areas where you can save money.
Ideally, you should start with creating an operating budget. The details of your monthly expenses, such as labour, rent, and materials can help you to project revenues for the financial year.
Once you have a clear understanding of your spending habits, you can start creating a long-term budget that includes expenses like marketing and future investments.
Creating sub-accounts under your main wamo accounts is a great way to efficiently set and oversee budgets. Link a debit card to a particular sub-account and set a limit on it. Set up sub-accounts labelled: rent, tax, payroll - for example - and set up recurring payments into each from your main account. To find out more about sub-accounts go here.
3. Get a corporate card for your business
Corporate debit cards solve the problems associated with digital spending in small businesses. These cards come with card numbers and can be used exactly like physical debit cards. They increase the company's power to track money and improve the cash conversion cycle. With these debit cards, you can make business purchases without affecting personal liabilities.
In addition, these cards offer fraud protection, online account management and detailed spending tracking. This makes it easy to ensure that your spending is not impacting your company's core business goals.
With a wamo business account you can issue as many physical or virtual cards as you want for you and your team. Issue cards in a team member’s name and link them to a sub-account also in their name. This is an effective way to empower your team and an efficient way to optimise security and budgeting.
4. Don't forget to pay yourself
As the business owner, you must be paying salaries, wages and bonuses to your employees. But, don't forget to pay yourself!
You need to take out a salary that's proportionate to the size of your company and your skills. While it could be tempting to put profits back into your business, it's important to have enough saved money to live on or pivot if your existing business fails. You may also want to save some money to reinvest back into your business.
5. Track your income and expenses
This may seem like a tedious task but tracking your cash flow is one of the best ways to manage your business finances.
By tracking your income, you'll be able to see which products or services are selling well and focus more on those areas. You can also use this information to negotiate better deals with suppliers.
On the other hand, tracking expenses will help you understand where you can save money. Maybe you're spending too much on rent or marketing? Identifying these areas and making small changes can create a major impact on your overall financial health.
To manage your cash flow, you can follow this exercise to control incomes:
- Separate your incomes by their due dates
- Create a table with 3 columns: Date, Income, and Paid
- Mark each income as it comes in and track when they are due
- Once the income is paid, mark it as PAID in the Paid column
- Create discounts for your clients, say 2% discount, on early or timely payments.
To control your expenses, split them into 3 categories:
Unavoidable/necessity, nice to have, and low returns.
- Unavoidable/necessity expenses are the ones that you can't do without and will always be there, such as rent, water, and electricity.
- Nice-to-have business expenses are the ones that you can live without but would make your life a lot easier, such as a new laptop or a nicer office.
- Low-returns business expenses are the ones where you're not likely to see a lot of financial return, such as software services.
With your wamo business account you get a clear view of all income and expenses from your dashboard and can set up sub-accounts for different cash flow streams, fee-free.
6. Schedule to organise
Set aside time each week to organise your finances. This will help you stay on top of your spending and avoid any nasty surprises.
Depending on your business goals and situation, this may include scanning receipts, identifying overspending, filing financial reports, managing taxes, paying bills, managing invoices etc. Without managing these tasks, you cannot make any business decisions or understand where your money is going.
Experts suggest allocating at least 30-45 minutes every week to keep your business revenue breezy. While it's tempting to do this all on your own, seeking help can make this process a lot easier.
You can order reports and analytics from your wamo dashboard within the timeframe that best suits you to ensure that you are constantly up to date with how your business is doing.
Open a wamo account to save extra time and money in your business.
7. Seek professional help
If you feel overwhelmed by your business finances, it's a good idea to seek professional help. Experts can help you create a budget, understand your financial statements and recommend ways to save money. They can further help you by creating everyday analytics and reports, notifying you, upgrading your financial status, and enhancing your long-term financial goals through better revenue generation.
Managing finances can be daunting and as a business owner, you have a lot on your plate already! But delayed financial decisions and improper access to financial wellbeing can put your business into a risky zone.
We started out as a small business and have designed wamo to be the best possible all-round solution to all the finance challenges that small businesses face. Wamo puts you in control while freeing you up to focus on the other things that are important to you.
Ready to get your business finances in order? We’d love help! Open an account with wamo today - and start growing.