Business finance – can often be defined as the provision of money at the time when it is needed by a business. It is the money business people require to start, run, or expand a business.
Importance of Business Finances:
Business finance is a necessary requirement for the establishment of any business. Money is the most important tool needed to bridge the gap between production and sales. Some important functions of business finances include:
- To fulfill certain circumstances and any unexpected problems that may arise.
- For the promotion of sales.
- To take advantage of any business opportunities that may arise.
Keeping on top of your finances is one of the biggest causes of stress for small business owners, as the financial position of a business can make or break the future of the business in the long run. As a business owner, you may need to wear multiple hats so as to keep the business running and there are various challenges that small might arise. However, managing your finances is something that you have to be on top of.
5 WAYS YOU CAN STAY TOP OF YOUR BUSINESS FINANCES
1. Keep on top of your taxes:
You need to make sure that you keep on top of your taxes as a small business, it is recommended that you get help from a small business accountant to help direct the complex tax calculations. In order to keep an eye on your taxes, mark all the relevant dates in your calendar and diary. You need to remember and be aware of dates such as self-assessment returns, as well as when the new financial year starts.
Tax obligations depend on what type of business you run, and whether or not you have employees. You will need to ensure that you are putting enough money aside in order to pay your taxes when they are due. For instance, it is recommended that you put aside a minimum of 20% monthly, at the very least. This is very important, and if carried out properly on a monthly basis it can be bearable for a business.
A budget is very crucial in ensuring that your finances and expenditure are visible to you. For example, you can highlight all your business expenditures in your budget, and it can provide you with a clear perspective of all the numbers that you need to keep an eye on. A budget can help you see if you need to cut business costs, and reveal where you can save money for your small business, along with helping you manage how much you can afford to spend on certain things. Revisit and regularly update your budget to ensure that it’s a continuously updated, working document.
3. Cash Flow:
You should ensure that you have a steady cash flow for your business, as poor management of cash flow can lead to negative consequences for the sustenance of your business. Essentially, cash flow is the money you have at a given time. To ensure good cash flow, make sure to have money before you have to pay money out and that invoices are paid to you on time. Confirm and make sure that you do all that you can to maintain a steady cash flow. You can ask for an upfront payment and give a discount as an incentive to do this.
4. Business Expenses:
You need to keep track of your business expenses because this will determine when you need to spend money, and when you need to hold back. A great way to track your business expenses is by using a credit card. When it’s time for taxes and claiming relief on business expenses, you will have a record of everything you have spent on.
A budget can also contribute to helping you manage your business expenses. For example, if you need to purchase a new piece of equipment because your current one is slow, or you need to redecorate, your budget will help you decide and prioritize when and where the money should be spent.
5. Accounting software:
Accounting software can really help you keep a watch on the financial state of your business finances. There is a variety of accounting software options available and you will need to carry out some research to ensure you discover and select the right one for your business. Some features of most accounting software include; invoice procedures, scheduling, reminders, and a place for the financial record to get different sorts of data.
Managing a business is not easy but it is important that you are ahead of your finances. ignoring your finances for a long time puts you at risk of missing important issues on time, and less likely to make better money decisions.