How to Create a System for Managing Business Finances Efficiently
Managing finances is probably one of the most important aspects of running a business, no matter the size or the structure. If there is room in your budget, hiring a bookkeeper or accountant is recommended but I know that it’s not always feasible. So, this month I’ll be going over tips and tricks to keep your bookkeeping efficient, with or without a team.
Financial management is directing and tracking the money that you earn, spend, save, and multiply. It includes things like budgeting, cashflow, financing, and debt management. When managed carefully, it ensures that you are able to cover expenses, payroll, and are compliant with industry standards. You can avoid shortfalls, plan for contingencies and the future (things like business growth, software updates, hardware updates, equipment, etc.). Proper financial management ensures the sustainability of your business.
Now let’s get into ways to keep everything manageable.
Keep personal finances and business finances separate.
Have separate bank accounts and filing systems for your personal funds and your business funds. This way it is clear what expenses, bills, and money is for what. You will also avoid spending hours pulling information for your year end and filing taxes.
Have separate accounts for different costs and save when you can.
Open an account for the various expenses that come due regularly- like your HST payments and taxes- and save up emergency funds. Your accounting software usually tracks your HST payments, so at the end of every month you can transfer the funds you will need. A good rule is putting aside 20 to 30% of your income for taxes. Having these separated from your general funds will ensure you have the money you need and saves time calculating everything at the end of the year.
Keep things digital and use the software that makes sense.
Online banking and bookkeeping services will help keep everything organized and avoid costly errors. Be sure to use the correct software that makes sense for you, like Quickbooks, Wave, or even an excel spreadsheet. Linking your bank account to your software will help you save time and ensure accuracy.
Run your reports on a regular basis and be sure you understand the terms and impacts on your business.
The most important things to track are your budget, cashflow, and your income statement. I’d recommend reviewing your cashflow and income statements at least monthly. Your budget can be reviewed every quarter. Familiarize yourself with what the terms mean and how they impact your business.
Set clear protocols for yourself and your team (if you have one).
You can set deadlines for things like entering expenses, reconciling accounts, and reviewing reports. You can also decide how much a month you put aside, or have a formula for determining the number. If you have a team, it is important to ensure the right people have access to the right information. Your employee may not need to see your bills or tax information, but your bookkeeper sure will.
With the right tools and practices financial management can be smooth. It definitely comes with a learning curve, but you will thank yourself in the long run. I hope this guide helps you get started. I am no accountant, but I can help with your bookkeeping. If you would like some assistance please reach out!
