As a small-business owner, it is imperative that you have your finances under control as that may be the difference between your business succeeding or you struggling to pay your staff and ultimately going under.
But before going into managing your finances, hire a BAS agent or an accountant as soon as you start your business, especially if you are not up to speed on tax, staffing and systems. Having someone who knows what they are doing from the offset will save you a lot of money and time down the track I would get onto a system such as Xero or MYOB immediately too as they will help you track invoicing, cashflow and payroll.
As for my tips:
Use financial planning and forecasting
I suggest creating a list of all of your key expenses, such as rent, staff, product, marketing, electricity, etc. and ensure you have an understanding of how much you need to operate.
Same goes for cash coming in. If you have clients on retainer who frequently pay you, your forecasting will be much easier than if your business was product-based. If you have a business that makes one-off sales, however, you may forecast month-by-month or even based on the sales you had the year before if your products are seasonal.
Monitor your cashflow
You want to monitor your cash and make sure things are running smoothly. For example, your expenses will keep needing to be paid. Are your clients paying on time? Can you create incentives for them to get them to pay faster? Projecting your cashflow is one thing but make sure your projections are actually happening or you may end up in a situation where it is hard to pay your bills.
Make sure you regularly review your cashflow. If you are a business that is already making a profit, make sure you keep an eye on your bottom line and make sure you’re making enough vs. your expenses
Adjust your margins if necessary
Don’t be afraid to adjust your margins. If the cost to make your product goes up or you are finding it hard to keep up with your bills, it’s a sign to look at the prices you are charging or even what you are spending since getting a better rate to improve your margin works too.
Invest in growth
Having investments that will help your business grow is generally a worthwhile expense. If you have a great website that allows you to automate some of your work, then it is justifiable. If getting some machinery that will help you develop your product faster is justified, then look into it. If you can make and sell more units, you will make more money.
While you don’t want to be reckless with your cash, if something will help you get further faster, it is worth considering.
Many small businesses are in debt when they start out. That is not necessarily a bad thing since it frees up your cash to pay for essential things, such as staff. However, it is important to motor this debt because you don’t want to get in over your head. Make sure you have a plan in place to pay back the debt.
Have a rainy day fund
A start-up may not have this overnight but when you start hiring staff, you are going to want to have a rainy day fund. I would recommend having three months’ worth of expenses saved so if unforeseen situations occur, you won’t have to close your doors immediately. It is also helpful to have extra money for when you need to do something, like build a new website, move offices or purchase new equipment.