No matter how well you may feel you have a handle on your business, poor financial planning will be your undoing. Keeping a careful watch and constant control over business finances represents one of the most pivotally important elements of running a successful business – one that cannot and must not be overlooked.
Of course, exactly how to go about the job will vary from one business to the next in accordance with its size, nature, purpose, targets and so on. Nevertheless, our experts at PKF Francis Clark maintain that there are certain essential rules that should be followed by all business owners across the board, in order to ensure their own financial situation doesn’t adversely impact their business operations.
Here’s a quick rundown of five examples of exactly such universal financial tips for business owners:
- Budget expenses
First and foremost, it’s of crucial importance to work out exactly how much money you’ll have to make in order break even, in-line with how much it is going to cost you to run your business day in and day out. When it comes to budgeting business spending, you need to think about perspective income, fixed expenses, variable expenses and the financial buffer you have in place for emergency use. You need to know how much you are likely to spend or you can’t realistically work out how much you need to make.
Try to bear in mind that there is a very big difference between spending money on your business and investing in it. The key difference being that savvy investments guarantee healthy and, in many cases, long-term returns, whereas many other spending habits bring little to nothing of the sort. Weigh up each and every expense in accordance with what it is likely to bring back to you in the future.
From the very first day you go into business, and perhaps even before day-one, you need to be keeping comprehensive, accurate and organised financial records at all times. The simple fact of the matter is that for one reason or another, you are guaranteed to need them at some point – not having any to speak of or having an impossibly chaotic recordkeeping system could prove to be a costly mistake.
- Keep separate accounts
Don’t fall into the trap of using your personal accounts for business expenses, but instead make sure you have separate accounts set up for each. The reason being that, it’s far too easy to lose both control over and track of one side of your expenses/finances or the other and if you have everything combined in a single account.
- Keep it lean
Last, but not least, there are certain costs you will have to bear on a pretty constant basis and these are the costs you should be looking to keep to absolute minimums. Take for example the software you use, the telecommunications subscriptions you require, IT hardware and so on – you have the choice of either investing in the highest-end products and services which you may not wholly need, or opting for something simpler, not to mention infinitely less expensive. Think carefully about all fixed costs and do your best to minimise their impact when and where appropriate.