Many businesses face difficulties in managing their finances and end up losing out money that can be utilised better on for other business activities. It becomes imperative for the small business to keep their fund organised as they are involved in the day to day operations and loses track of their daily finances.
Here are the 7 tips that will help businesses to manage their small business finances in an organised way.
1. Separate personal & business banking accounts
Businesses shouldn’t have any business transactions going through the personal accounts of the owner as it becomes challenging to dissociate accounting transactions related to the company causing the business credit score to get afflicted.
2. Business credit card or small business line of credit
Credit line facility is required by the small business to get a regular flow of cash to execute business operations. However, companies need to ensure that they should use the line of credit only when it is required and not for unnecessary expenses leading to the pile-up liabilities.
3. Setting up a small business filing system
Here are some of the items that can be chosen on paper or digitally for managing the business filing system
- Accounting & Book-keeping records
- Bank statements
- Permits & licenses
- Employee records
- Vendor records
- Tax papers
4. Setting aside money for taxes
Every businessman has to sit with his accountant every month and calculate earnings before interest & taxes. The revenue is earned after deduction of the operating expenses. The amount that needs to be set aside for the tax should be 25% to 30% into a business saving account. The amount can be varied on consulting with the tax or financial consultant. The amount should be enough and sufficient that should cover state tax, local income tax and self-employment taxes.
5. The low-cost accounting program
There are lots of low cost or free accounting programs that provide relief from complicated accounting transactions. Some of the examples of the best applications are Tally. ERP9, Quickbooks India, Zoho Books, Vyapar, Giddh, Logic, etc.
While choosing an accounting programme the businessman have to understand the purpose of needing a particular accounting programme such as,
- Need to track income & expenses
- Need to send invoices
- Need to track clients and vendors
- Kind of financial reports required
- Payroll processing support in case of having employees
- Need mobile access for seeing the data
- Requirement for credit card integration
- Requirement for 3rd party E-commerce platforms
- Need to manage inventory
- Requirement to integrate with bank
The accounting programme should be chosen to suffice the above requirements that differ as per the nature of business.
6. Advantage of using Mobile App
Mobile apps help the small business owner to organize the various aspect of finances
- Mtrackr – this app manages all the expenses and is useful for those that have multiple bank accounts
- Zipgrow – helps the entrepreneur to keep track of the amount outstanding and the amount paid by multiple debtors. This app also has an interesting feature of giving reminders to the debtors about the outstanding payments.
- Walnut – In this app, the expenses get categorised into various heads such as food, travel, drinks, etc. The graphs and charts help the entrepreneurs to check the expense patterns
- Money Control – it helps to track stock market investments
- Tax calculator – It helps the entrepreneur to plan the taxes better & makes the computation easier
- Chillr – it is a money management app which has exciting features like QR scanning, expense tracking, & transfer of money
It is important for the entrepreneur to understand the specific need of the app, for what he is paying for. If the software contains many features that are not as per the requirement then a simpler version can be chosen to reduce the cost of the app.
7. Set aside time to stay organized
It is recommended to set aside around an hour per week to update business records, personal records, & review the investment portfolio. The task that can be included is adding data to the financial software, scanning receipts, filing, reviewing financial reports, paying bills, collection, invoicing, etc.
It is significant to keep the finances in order, in order to keep the business profitable. At the same time, the entrepreneur also learns to manage the tax & avoid any confusion during tax returns. The tips mentioned here will help the entrepreneur to be on their toes with their finances and will be confident that they have kept everything under process.
If the entrepreneurs feel that he lacks appropriate knowledge to manage his finances, then being in contact with a good financial advisor is also the best way to be on top of the finances. The advisor brings in the years of experience dealing with complex financial decisions. There are still many businesses in India who have not taken financial advice for managing their business and according to the online survey done by ET Wealth, only 19% have exploited the opportunity