Nine out of ten small business fail in the first 5 years, mostly due to poor financial management. So how can you improve the chances of succeeding?
1. Ensure you have enough start-up cash.
Before you commence trading calculate how many dollars you will outlay to get started as a general rule, increase your estimate by at least 50% and you will be close to a realistic figure. Then calculate your first 2 months running costs including wages (including yourself) electricity, gas, rent, telephone, stock purchases, insurance etc and ensure you have these costs covered.
2. Make a budget
Once you get started in business ensure you have a budget which accurately reflects your likely income and expenses. This will enable you to estimate your likely profits and losses in the early months. You should measure your actual performance against your budget to reassure how your business is progressing.
3. Establish a system.
You need to record your financial transactions on a regular basis. These records enable you to measure how much each client spends with you. The probability of your business, the margin on your stock, whether your costs are too high or too low, and if your client base is growing.
There are many applications out there that assist you in recording your finances and bookkeepers that offer this service for you at affordable rates.
Suttie Financial Group works hand in hand with Chilli Bookkeeping. Based in Melbourne and with over two decades of experience, they consist of predominantly accountants, so their standards are exceptional yet kept at an affordable cost. Visit Chilli Bookkeeping website to learn more and get a 30-minute free consultation.
If you are starting out and can’t yet commit to a full-time bookkeeper or software packages, you may consider using one of the many Excel templates provided by Microsoft and customise it to make it your own. Make sure you include the following information:
- Date
- Title & Description
- Total Money Income per month
- Total monthly expenses
- Total monthly savings and;
- Cash Balance.
4. Maintain all your documentation and receipts.
Unfortunately, the ATO requires you to maintain your financial records for up to 7 years. The easiest way to keep these records is to scan them and save them on your computer. You can scan multiple records at the same time and we do recommend you scan them in categories.
5. Filing your documents
Okay, you now have scanned your latest batch of receipts, so what now? When filing your receipts, contrary to believe you should not store them by month but in fact, is recommended by categories. Some examples can include:
- Office Maintenance
- Marketing
- Accounting
- Technology
- Tools
- Food
Using thing filing system will make finding a particular invoice much easier than having to view each month. Labelling is also essential. Do not scan and leave your pdf title as “doc13927” instead rename like this alternative example “06.07.18 Water bill”. When saving them, they will order in the appropriate date automatically.
6. Back up your content
Following all the mentioned steps is fantastic but pointless if the information goes missing in the time of need. To avoid a catastrophe, back up all your saved work in a hard drive or potentially a cloud-based storage or both! Do this regularly depending on your workload.
So, there you go five crucial pointers to organise your finances better. For further information on organising your business check out some of our other great articles or contact our office at enquries@respl.com.au or (03) 9417 3511.
