One of the biggest worries and challenges facing small business owners is money management. It is something that has taken on even greater significance in recent times too. The restrictions to combat coronavirus shuttered firms and slowed earnings – in the worst cases – to zero. Even in normal times, though, it is essential to have proper oversight across your business finances.
Of course, the role of a small business owner is often one fraught with many different concerns. Just thinking about money management can prove overwhelming. Yet, there are ways in which to make the accounting and book-keeping process easier. And it does not always mean hiring a professional to keep watch over your business finance. Here are some steps that you can take:
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Open A Dedicated Business Account
In starting out and scaling up, it is not unusual for small business owners to use personal bank accounts. But this can become problematic. From auditing and record-keeping, to security and credit histories – there are numerous reasons why a separate business account is a good idea.
For even greater clarity over your business outgoings, you may even wish to explore a prepaid business account. Often available as an off-the-shelf solution, such accounts allow you to place defined limits on expenditure – whether that is regular business payments, payroll or expenses.
Set Up A Bookkeeping System
With a business account in place, it is critical to keep a record of all transactions. This will mean setting up a bookkeeping system. It can be as simple as creating a Microsoft Excel spreadsheet to chart all your business dealings and transactions and keeping in line with bank statements.
This is a process that can become simpler and more habitual with time. But the reason why this is so fundamental is that effective bookkeeping makes it easier to interpret and account for that data. If you do not know where your money is going, it can have a significant impact.
Know Your Tax And VAT Obligations
For small business owners, there are certain tax and VAT obligations you will need to meet. But it can depend on the size and type of your business as to which tax rules apply to you. Find out what your obligations are – because it will have an impact on your accounting and finances.
This gives you the information you need to file returns when necessary and pay the correct tax. With a business account and/or bookkeeping system, much of the data you need will be readily available. And it can reduce the likelihood of errors, which can prove costly in the long term.
For some small business owners, it might seem much easier to recruit an accountant to do this – whether in-house or external. But this is not always an option. That should not be a barrier or an excuse to not keeping track of your finances, however. And it is easier than you might think.