Whether you’ve been brave enough to open a startup or if you’ve had a small business for a number of years, there are always ways you can improve on the financial management of your business. From labour to advertising costs to rent, there are several ongoing costs that businesses face. If you want to remain afloat and stay competitive, you need to be highly in-tune with your business’s finances and understand how to manage them correctly. Here are some habits you can adopt to help you stay on top of your business finances.
1. Don’t cut corners with accounting
Hiring a good bookkeeper or qualified tax accountant is one of the smartest investments you can make as a business owner, as it provides you with a candid snapshot of your financial position. This will help you understand your income, outgoing costs and any cash flow issues you may encounter throughout the financial year.
Working with an unbiased, trusted professional will also help you understand what tax deductions you can claim when the taxman comes knocking. For instance, if you have a home office, your home office equipment, work-related phone calls and any heating or cooling expenses associated with running your home office can be claimed as tax-deductible expenses.
Of course, there are useful software programs you can use, such as MYOB, but it also helps to have a licensed professional on side.
2. Keep business and personal accounts separate
Combining your business and personal accounts will only lead to a tax headache, so it’s important that you maintain separate accounts. Keeping your accounts distinct from one another will give you greater clarity when forecasting business revenue and profitability.
3. Be frugal with your expenses
Whether it’s travel expenses, laptops, printing or office equipment, you should negotiate for better prices on all of your business costs. Review the payment terms with your regular partners or suppliers to see if they can offer you a better deal or if they can value add. If you purchase from them on a regular basis, and if you buy in bulk, they’ll be inclined to offer you a better deal as they’ll want to keep you happy.
A major cost worth negotiating is your rental amount, particularly if you have an office space in a capital city. Do some research online and see what the average rental costs are for office and retail spaces within the area and see if your landlord can lower the price.
4. Adopt a long-term view
Every quarter you should conduct a financial forecast to help you understand any fluctuations you may experience with sales or demand. This is a good business practice that will allow you to identify any upcoming bottlenecks and address them before they arise.
5. Compare business finance options
Most businesses need to draw on some kind of finance in order to make ends meet and the type of loan you apply for will depend on your business type and your borrowing needs. For example, if you travel frequently throughout the year and you want to leverage frequent flyer points, you may want to consider a business credit card. On the other hand, if you buy goods from an international supplier, you may want to consider trade finance.
Whether you need a line of credit, trade finance or a short-term loan, there are many options available for small businesses. However, it’s important that you spend time comparing your options so that you make the right decision for your business.
While it’s important that you secure a competitive interest rate for your loan, you also need to consider the flexibility of the repayment terms, loan fees and the type of customer service offered by the bank.
6. Adopt debt-reduction strategies
If you’re servicing a business loan, you should get into the routine of making extra repayments so that you can repay the debt as soon as possible.
For instance, if your monthly loan repayment is $820, round this up to $850 or even $900 if you have the capacity to do so. Putting an extra $30 or $80 towards your loan each month will help you minimise your interest charges and repay the debt quicker.
Making more frequent repayments is another way to pay off your loan sooner. If you switch to fortnightly repayments instead of monthly, you’ll repay your debt faster.
Turning your business dream into a reality is a bold move and if you want to make it, you need to remain in control of your business finances. Getting into smart money habits early on in the game will help you take charge of your business expenses and enable you to reach your financial and overall business goals.
Bessie Hassan is the Money Expert at finder.com.au, Australia’s most visited comparison site, which helps Australians make better financial decisions. Bessie often appears on national radio, TV and throughout digital publications, sharing her best money-saving hacks and advice.