How to stay on top of your business’ finances – top tips for entrepreneurs
Staying on top of your business’ finances is essential, but can be difficult. Invoices have to be fulfilled, employees have to be paid, pension contributions have to be arranged, and tax returns have to be filed – amongst other things.
As an entrepreneur of almost a decade’s vintage, I’m well aware that keeping your incomings and outgoings in order is an ongoing frustration. And yet, things can be done to make it easier – and a lot of them are surprisingly simple.
Here are just a few...
1. Manage your paperwork
Paperwork can be the ongoing nightmare of your life as an entrepreneur, but it doesn’t have to be. One of the first things I learned as CEO was to keep it under control. If an invoice or receipt came in, its details were immediately added to a database. Initially these documents were managed in Excel, but over time, it was replaced with accounting tools such as Xero and Receipt Bank. By keeping our books online in this way, we got a better overview of our financial position – and we ensured that documents didn’t pile up.
Digitising these records ensures safety and consistency, and prevents them from accumulating into an unmanageable heap.
2. Choose your advisors wisely
When it comes to choosing an accountant, often this comes down to personal recommendations from a friend or fellow business, or conducting your own research.
The great thing about modern accounting is it can be done from anywhere in the world. This is very different to when I founded TopLine Comms in 2008; you now have a wide range of choice, can send and verify documents online - and it doesn’t matter if your accountant’s in London or Zanzibar.
This means it’s now much easier to pick financial professionals who understand your business and can advise on the best solutions for managing cashflow, for example invoice finance.
Choose wisely – you really need to be able to trust these people to spot errors, meet government tax filing deadlines and have your back, financially speaking.
3. Know your stuff
That said, you can’t rely too heavily on advisors. You need to know your stuff to some extent or another. Partway through my career, I earned an MBA: it gave me a solid primer on balance sheets, P&Ls, and everything else a responsible CEO needs to know about finance.
You don’t need to go to those lengths yourself, but you do need to know what you’re talking about when you’re liaising with a supplier or selecting an accountant.
It also helps to study your financial data from time to time. I’m obsessed with my company’s accounts to an unhealthy extent, but it means I can spot an anomaly from a mile off – and correct it before it becomes a more significant issue.
4. Create processes for everything
A good way to ensure that your business’ finances don’t become too complicated is to create processes for everything – and I mean everything – relating to them.
Receipt management needs a process; bank reconciliation needs a process; invoice payment needs a process; spending needs a process. Create instructions in an easily accessible document for each of these so that new people can get up to speed, and so that everyone who handles your finances does it in the same way – this is really important for preventing future headaches!
5. Set deadlines and stick to them
Speaking of speed – make it a priority. The most effective small businesses are those who work from the most up-to-date information. If management accounts aren’t done in good time, your financial data becomes distorted.
Set clear deadlines for certain tasks, and make sure the people accountable stick to them. At my business, I insist that all management accounts are done within 14 days of month-end. You can’t make decisions about your company’s future when your data is stuck in the past.
It’s also smart to apply this philosophy elsewhere. If invoices aren’t paid, chase them down ferociously – as though your children will starve if they’re not paid. When clients know that they can’t get away with not paying, they develop better payment habits. Ultimate Finance has highlighted how widespread this issue is, with research finding 81% of SMEs have late payment issues.
Equally, make sure you pay suppliers on time and in full. Not only is it good practice, it makes them like you more – maybe to the point of offering discounts and other incentives.
These tips aren’t the be-all and end-all of financial management: they’re simply good practice. Every business is different, and over time, you’ll develop a sense of what does and doesn’t work for yours. Keep these basic principles in mind and pay attention to your money and you won’t go far wrong.
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