3 Key Steps to Safeguarding Your Business Finances
Running your own small business is one of the surest ways to enjoying financial and career autonomy. Instead of being beholden to the orders and dictates of a boss, and instead of being just a small piece of a much larger corporate machine, you get to enjoy being fully in the driver’s seat. The master of your own destiny.
But as you might have guessed, the other side of the coin is that you’ll have to invest a tremendous amount of your own time, resources, and energy to making the business a success. You have a shot at enjoying tremendous success, but it comes with the ever-present reality that you’ll have to deal with failures and stumbling blocks along the way.
Finally, you’re going to have to be organised and responsible to a degree that you otherwise never have been. The ordinary office worker can get away with a lot that a self-employed small business owner can’t.
One of the areas where this responsibility is most needed, is in managing your business finances. Here are a few tips for achieving this successfully, and avoiding potential crises along the way.
Keep your books meticulously updated
You may be obeying all the laws pertaining to business to the best of your ability, and you may be conscientious in how you do business and manage your finances. Nonetheless, there is an ever-present risk that you will be wrongly invested for VAT fraud and other wrongful practices, and in such an event, you will need to defend yourself to the hilt.
What “defending yourself” means, in this context, is primarily that you will need to have your books perfectly balanced and kept meticulously up to date. You will need to have every transaction recorded painstakingly, and to the greatest possible extent, you will need to keep receipts of all transactions, whether scanned to a hard-drive, or stored in physical space.
Keeping your books in such pristine order can be a daunting task, especially if you’re running your business alone. One solution would be to hire a professional and trustworthy accountant to help you manage the process, but another might be to simply use the right tools. Quickbooks, for example, is a service designed specifically to streamline the process of managing your books.
Frequently audit yourself for waste
All businesses are bound to waste some resources sooner or later. Life is always a bit messy, and sometimes our energies just get misapplied. Chaos ensues as a result, to a greater or lesser degree, and when the waste of resources reaches a certain, critical threshold, the business is likely doomed to go under.
Auditing your business for areas of waste and inefficiency is one of the most important steps you can commit to in order to protect your finances, and ensure that your hard-won income isn’t being squandered on poor decisions or redundant or sub-optimal systems.
Performing a full self-audit every quarter or so is a fantastic place to start in this regard. You can establish a checklist of things to look out for; you can see which tools or services you use are more expensive than their competitors, without being substantially higher in quality of service, and so on.
Perhaps a disproportionate part of your budget is being allocated to some area of your business which is, in fact, responsible for very little if any of your productivity or income? Use the “80-20” rule for identifying such areas — assume 80% of your results come from 20% of your actions. The remaining 80% of your action are likely redundant or wasteful.
Use budgeting software to plan your personal expenses, and maintain work-life balance
Maintaining work-life balance for a small business owner isn’t just a matter of leaving enough time aside to enjoy playing with the kids, or going out with friends. It’s also a matter of not letting your work and personal finances cross over into each other’s domains, beyond the point you’re pre-determined they should.
As a small business owner, the temptation will always be there to skim a bit of money off your business budget to use for personal expenses, or off your personal budget to shore up some area of the business.
If this is done in a haphazard, uncontrolled way, however, chaos ensues, and both your personal life and your business may be compromised.
Use budgeting software and tools to manage your personal finances, so that you never end up in the position where you need to reach into your business piggy bank.
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