Money is a significant stressor for many people, and when it comes to business, that stress can be amplified. That’s why it’s crucial to have a system in place for organizing your finances so you can make the best decisions for your company.
Getting a hold of your spending habits is often an excellent place to start. If you are not used to tracking numbers closely, it might take some time for this habit to stick. But once you develop the practice of recording where every dollar goes, it will be much easier to make tough decisions when necessary. Here are a few tips to help you get started.
Create a spreadsheet
Start by creating a spreadsheet with columns for what you’ll be tracking — income, expenditures, and savings. Keep things simple and follow your basic expenses for the first month or two. Doing so will give you a better idea of where your money is going so that, if necessary, you can make a plan for how to cut costs.
During this time, be sure to include all of your expenses — even the small ones. If you’re not tracking those expenditures from the start, you might find that they add up quickly and end up costing more than you intended to spend on certain things. It is especially true with travel or transportation.
Plan your budget based on the numbers you have collected
Use this information to create a budget with reasonable limits. Remember that when it comes to running a business, you’ll need money for operating costs — from payroll and accounting services to marketing and web hosting.
When creating your budget, think about what expenses you have to pay each month and how much revenue you can expect to bring in. Then, decide if the amount of money you’ll be getting in will cover your expenses or not. If you find that you’re struggling to make ends meet, consider cutting expenditures to save money.
Prioritize your financial obligations
Once you’ve created an estimated budget, prioritize spending by necessity rather than preference. Knowing how to balance your finances will help you make the tough choices that are often necessary for running a business.
Suppose you can either pay for new office furniture or hire a new employee. With the money you’ll be spending on the table, you might not have enough to cover your other expenses — like rent or payroll. So what would make more sense for your business?
Use productivity tools to save time
Technology can be a great asset in helping you to keep track of your finances. There are applications out there that allow you to manage your accounts and stay on top of paying bills and saving money.
These apps come in affordable and convenient packages that can save you time and headaches. In doing so, you can avoid costly mistakes that often come from being disorganized.
Make use of benefits from financial institutions
Don’t be afraid to ask for discounts or financial advice from professionals at your bank. A mortgage lender can help you find the best way to finance your home, and a banker can help you understand how to manage your credit cards.
It is much easier when you have an established relationship with a financial institution when you need financing. Talking with an expert in the field will provide you with options for managing your money more effectively to make it easier to keep track of. Besides, they will be more willing to work with you if they trust that your business has the potential to succeed and take care of its debt.
Take it one step at a time
It takes time for these practices to become second nature. It might take years of budgeting and tracking your spending before you can get it down pat. Just remember that keeping meticulous records will pay off in the long run if you are ever audited by the IRS or need to prove financial standing for some other reason.
When creating an organized system, don’t be afraid to start small. Track your purchases for a week or two before trying to account for every penny you spend in a month. It’s okay if it takes some time for you to get the hang of things, but by keeping records from the beginning, you’ll be prepared as your business grows and expands.
Now that you know how to manage your finances, it’s time for you to put it into action. By following the above steps, you’ll be set to take your business to new heights and start on a path of success.