Despite the economic uncertainty that’s 2024, financial freedom is still very much at the top of the wish list for most Aussies, and they’re working hard to achieve it. Opening a small business or side hustle is at the top of the to-do list – nearly 50 per cent of the 2.5 million small businesses now actively trading started post-2020.
It’s all in the foundations!
However, the reality is that one in five small businesses will fail within the first year, mainly because small business owners forget a vital part of starting a business – the importance of creating strong business foundations. To build a sustainable business with long-term growth,you need to be on top of the fundamental elements such as operations and people management, marketing and finances. They’re the key to long-term growth.
When it comes to achieving sustainable results, creating solid financial foundations means you’ll be more likely to set financial goals and make informed decisions about your business allowing you to weather challenges and adapt to changing circumstances.
But let’s be honest, the numbers aren’t sexy.
And once you’re at the coal face and time and resources are limited, it’s tempting to focus on the ‘fun’ stuff and forget the numbers altogether.
Simple steps to build solid foundations
Whether you’ve been in business for five minutes or five years, and no matter how big or small your team is, improving your financial foundations is easier than you think. Here are some practical ways to get started.
It’s all about success
Define what success means to you right now in this season of life and business. Once you know where you’re headed, create financial goals to help you reach your destination.
Get organised
To get your financial foundations in order, try these tips for getting organised:
- Set up business-only bank accounts. Start with three: an operating account, a tax and super savings account and a rainy-day account.
- Embrace tech to help you manage your money and save time – consider cloud accounting, budgeting apps or the humble spreadsheet.
- Create systems and processes for repetitive or regular tasks – from invoicing to running the payroll – get the information out of your head and on paper, especially if you want to outsource or scale.
- Incorporate a Money Monday or Finance Friday. Set aside an hour a week to focus on the finances – put it in the calendar and make it non-negotiable.
Get educated
Increase your money muscle and boost your confidence by increasing your financial literacy. Even if you ‘don’t do numbers’ or outsource, understanding the money-basics is key. Look for workshops, books, online courses or call in the experts for guidance.
The basics
Good cashflow is vital for good business, so create a cashflow forecast to help anticipate the business peaks and troughs – you’ll know when you can spend and when you need to save.
Create a budget to help allocate resources, track income and expenses and progress towards business goals. Know what taxes and other regulatory requirements apply to your business and make a note of reporting dates. While you’re at it, add a tax-saving line to your budget and save for compliance.
Regular pricing reviews are vital to increasing profit – consider the cost of doing business, wages and super in every review and always add profit. Make the profit and loss (P&L) statement your business BFF. Your P&L provides a business snapshot and can help you determine the next steps.
Solid financial foundations can help you create a profitable, sustainable and successful business and are vital for business owners who want to scale, sell or reach their potential. And, it’s never too late to get started!
