One of the most important parts of running a business is coming up with financial processes and procedures you’ll rely on to help you stay in control over your company’s money. The better you do it, the more likely you’ll be to stay on top of your budget and give your business a proper chance to succeed.
But what exactly are the best financial processes and procedures you can opt for? Listed below are some of them that are guaranteed to help you keep your company’s finances healthy.
Make budget-setting a habit
When running a company, it’s essential to always understand your financial situation and know exactly how much you can spend. Setting a budget gives you room to afford things that can take your business to the next level without affecting your operations.
However, creating a balanced business budget isn’t easy, and most budding entrepreneurs don’t know how to do it themselves. If you decide to give setting your budget a go, start by figuring out how much money you bring in every month.
Once you do that, it’s time to take a better look at your expenses. It’s important to keep in mind that there are two types of expenses – fixed and variable ones. The former refers to the expenses that are charged the same amount each month while the latter stands for costs that scale up and down. Pull it all together, and you should be able to determine your company’s budget.
Open a business bank account
Most business owners find it tempting to keep their company’s money on their personal accounts. Although it seems this makes things easier but the truth is, it can cause issues that can seriously hurt your company’s finances.
The biggest problem that could come up is you being unable to monitor your organization’s income and expenses. This means you could believe the company is doing well when it’s actually losing money.
Moreover, keeping personal and business finances on a single bank account makes extracting records for taxation purposes extremely difficult. Your safest bet is to open a business bank account and never mix personal and business finances.
Now that there are open banking solutions available, banks are able to provide even better services to their corporate clients.
Automate your processes
Long gone are the days when business owners had to spend hours looking at their finances just to make sure they get everything right. Nowadays, there are automation systems that make dealing with finances both quicker and easier.
Today, banks and financial organizations are using secure information sharing solutions, which greatly benefit their users, making their private information much more secure. For example, one of the most daunting tasks employers had to deal with used to be payroll.
Now, you can simply automate your payroll and focus all your time and energy on more important tasks. Not to mention that there are automation systems that help you collect data about your finances.
All you have to do is let these things keep an eye on your finances, and you’ll be able to collect data that can help you reduce your costs and gain even more control over your company’s money.
If you’re looking for software to start with, you can’t go wrong with QuickBooks.
Establish an accounting system
Obviously, accounting is an integral part of running a business and the more effort you put into recording the financial transactions of your business, the better the company will do.
Keeping good records for your business can help you in many ways, including reviewing your business activities and complying with tax requirements.
If you decide to give it a go, it’s important to remember that there are two accounting methods you can choose – cash and accrual. A cash-based method involves recording transactions at the point when your business pays with cash or receives cash payments.
If your business relies on cash transactions only, this is the way to go. Accrual method, on the other hand, involves transactions at the point in which they occur, regardless of when the payment is supposed to be made.
Most companies use this system as not so many businesses pay and receive payments in cash only.
Know how to do your taxes
Tax season comes with a number of tax-related challenges, and it’s the business owner’s job to know how to deal with them. The most important of it includes identifying the strategy your business should adopt.
If you get it right, the company should be able to maximize credits and deductions, which is always a big plus. Just like with payroll, there’s the software you can use to make the entire process more bearable.
Even the tax-savviest entrepreneurs choose to use this type of software as it offers protection no other method does. Also, if you want to get your taxes right, keeping all receipts is a no-brainer. There are goods and services that can be deducted from your taxes, but you need to have all your receipts if you want to take deductions.
Last but least, have in mind that you can deduct expenses related to your home office.
Finances-related tasks are one of the biggest problems new business owners face. If you’ve never run a company before, chances are you’ll find managing your business’s money difficult as well.
Luckily, if you opt for the right process and procedures, there should be nothing stopping you from staying in control of the company’s money. It might take you some time to get the hang of it, but once you do, you’ll have even more time and energy to invest in your core operations.
Alex is fascinated with “understanding” people. It’s actually what drives everything he does. He believes in a thoughtful exploration of how you shape your thoughts, experience of the world.