Small businesses are often faced with one important question: how can finances be managed effectively?  Unlike personal finances, there isn’t a single approach that can be applied to all the business entities out there. It all varies from business to business.  Talk to an accounting firm and they’ll give you some guidance, helping you establish a proper financial system. For right now, here is some advice that you can make good use of.

Keep personal and business finances completely separate

That dinner you had wasn’t part of a meeting with client, yet you used your business card. Those computers that you bought were meant for work, but you ended up using your personal payment card. Yeah, you can pay yourself back from your business or pay back to your business from your personal account. But DON’T!

It’s that simple.

Personal and business finances should never ever be mixed together whatever the circumstances may be. Generally, when you spend on your business, you should record a transaction. If you don’t or if you combine personal and business finances, then things can become a pain pretty soon and it will be hell for you to track down all the expenses.

So, separate the two accounts right from the start and you’ll be saving yourself a good amount of time and pain in the future. And let’s not forget that this will be a huge help when you lodge your tax return.

Set aside some time

For organising your finances that is. Spend around 15 to 30 minutes every week and the only thing that you should be doing during this time is to sort out your finances and make sure that they are in proper order.

And by the way, this little activity can even help you gain insights especially if you make good use of your accounting system.

Track salaries

Yes, there is a need to mention this separately. Whether you are the only one working or have a team of staff, track costs associated with salaries, benefits, leaves, overtime and other relevant expenses separately.  This will let you know if your labour costs are within the budget or outside it. Accordingly, you can decide if you should spend more on incentivising your team or if you need to cut down on some benefits.

Call the professionals

We mentioned this at the start of our discussion, but let’s talk about it again for emphasis. Accountants are a vital part of any team.  They are an expert in maintaining accounting and finance systems and have done it for so many businesses just like yours. They know exactly what works, what doesn’t and which deductions you should utilise.

Agreed, you may want to refrain from hiring an accountant for anything other than tax and other compliance areas, but trust us, bring a professional accountant and trusted advisor on board and the improvements made will more than compensate for their hiring costs.

Higher Purpose Accounting can help you in setting up your accounting system and managing your finances. Visit our website or give us a call on 0434 349 704 for more information.