Risk is a concept that goes side by side with owning a business. Since risks, especially financial risks, can’t be avoided, you have to make sure that these are guarded and calculated.
Your business accounts’ status is essential to your company’s growth. That said, here are some tips to better manage it:
1. Don’t overlook day-to-day management
If you’re a start-up business, it’s best that you’re on top of your daily transactions inside and outside of the office. It’s tempting to delegate this to a manager, but you may want to have an overview of how everything is run.
One of the aspects that you need to have a closer look at is your cash flow. These are some things that you may want to watch out for:
- The bookkeeping of your income versus your expenses. If you’re not confident handling this task yourself, then you may want to hire outside help. It’s important to note that bookkeeping is different from accounting. An accountant would check what your bookkeeper has kept and would create your financial statements for tax purposes and future merger plans. You may ask for referrals from friends or check some firms. With the internet making it possible and easy for businesses nowadays, you’ll inevitably come across a firm’s website that can help you with your accounting needs and other issues in the financial aspect of your business.
- Check your spending. Reviewing your costs will allow you to rethink whether those expenses are necessary. For instance, you bought another printer though you already have one. Also, avoid extravagance that is uncalled for at the expense of the business’ finances.
Another thing: separate your personal expenses from the business’ expenses. If you’ve spent your own money towards the business account, plan on when you’ll pay yourself back.
- Always invoice within 24-48 hours from the time you’ve rendered your service or sent out some goods. You’re not in business to offer things for free. Invoicing in time gives you a clear projection of how much money you’ll have in the next few days or months.
2. Take on critical business matters
These are beyond your daily business dealings. The things involved here are the business’ legal aspects, expansion plans, facility upgrades, and others.
- For matters that deal with legalities, evaluate on your end whether you need to hire a lawyer and be billed for the services hourly, or if you should opt for a per-project basis. Whichever works to your advantage, then go for it.
- Expansion plans must be carefully analyzed whether you’re ready for it or not. It may be too early for you to expand, and end up hurting your business finances in the long run.
- Facility upgrades must be studied well. Do you really need to buy a machine or lease one instead? Either way, one is a wiser option. Without weighing the pros and cons, you might just find yourself getting something that would become a liability instead of an asset.
3. Set up your systems
You need to be organized in all areas of your business, from your payroll system to your invoicing system.
Here are some things that you may want to do:
- For your payroll system, you must first decide whether those working for you are your direct employees or independent contractors. Set up a schedule for your salary release. Since hiring a virtual employee is already a fad, you must identify as well whether your virtual employees will be on a fixed monthly rate or an hourly basis. Once you’ve identified those, don’t forget to withhold the correct amount for their taxes.
- Establish your bookkeeping system. You have the option to hire a bookkeeper, or if you still have time to do the bookkeeping yourself, there is software available to help you. You can then purchase this software and then learn how to use it.
As you do your bookkeeping, it is best to know that there are two types of bookkeeping methods: the cash method and the accrual. On the cash method, profits and expenses are only acknowledged once they are paid or spent. Meanwhile, on the accrual method, profits and expenses are recognized at the time they occur.
The tips given above cover the basics for you to manage your business accounts better. If you follow through, then the possibility of ending each month—if not the year—with sound financial health is high. Be sure to check your daily dealings. Think carefully before you make a move, especially if it involves money. Lastly, make sure that you have weighed all options before you jump into something.