You’ve created a business based on something you’re passionate about, you love helping others… all you need now is profits!

Sounds like a no-brainer, right? The point of running your own business is to bring in the cash and enjoy healthy profits. Without profit, you don’t have a business, you have a hobby – and likely an expensive one when you take into consideration all the expenses that come with running a business.

If you want your business to be successful, you need to manage your finances accordingly. Start with these basics:

Pay yourself!

As a small business owner you may be tempted to keep putting every cent you earn back into your small business, but it’s important to compensate yourself as well. You need to pay your own bills, be financially sound personally, and have money set aside for your retirement.

I hear so many business owners say “I’ll pay myself when I’m making enough money”, but then they have no incentive to make it! When you pay yourself regularly, it drives you to take more action and work on making those sales, because you’re now accountable for those funds. You’re not simply trying to make enough to cover your bills anymore, you’re financially responsible for the wellbeing of someone important who works for the business – you!

Set your pay rate and your pay date, and don’t look back.

Have separate business bank accounts

At the absolute minimum, you need to keep your business and personal finances in separate accounts. When they’re lumped in together it’s much more difficult to track how your business is going and accidentally spend the money you should be keeping aside for expenses, payroll and profit. When you have separate bank accounts for your business and personal finances you can more easily monitor where and how you’re spending money, and it makes things easier to track for tax purposes.

Now that you’re clear on the distinction between business money and personal money, let’s power up this move for more success. My clients have set up their bank accounts so that every time they get paid, a portion goes to:

• Putting aside profits
• Paying themselves
• Paying into their super
• Paying their staff or contractors
• Paying their business expenses

Each has their own account to belong to so the finances don’t get mixed up and they don’t accidentally spend money that is earmarked for something important.

Once they set up their accounts this way they become profitable immediately, take more accountability for their finances and see a boost in motivation and activity towards growing their business.

If you want that for your business, get in touch and we’ll chat about what it will look like for you.

Have a set billing strategy

When you own a business you’ll deal with clients who are slow to pay their bills. Money your clients owe you isn’t accessible to you until it’s in your bank account. Monitor your invoicing system to see which clients pay you on time and who takes their time paying your invoices. If you have too much money tied up in unpaid invoices, you need to adjust your payment policies.

Consider charging interest on late payments, rewarding with discounts for payment up front, or giving more strict terms or shorter payment timeframes. You can also charge a deposit for your goods or services so you still have some cash flow while waiting for clients to pay the remainder.

Remember to invoice immediately and follow up before the payment deadline, so you aren’t stuck waiting for payment. If your clients are large companies with their own payment terms, find out what those are and be mindful of them when billing.

Above all, you need to make sure you have a process for handling delayed or default payments. “If this happens, then I do that.” Document the process and if you’re uncomfortable following up late or default payments with clients, hire a virtual assistant to take care of the process for you.

Keep your paper and digital receipts

Now that there are digital platforms for managing the financial aspects of your business, you don’t have to have physical receipts taking up space in your office. Instead, you can go paperless, and keep all your receipts digitally.

Make sure you know the laws in your area for how long you have to hold onto receipts, pay records and other financial documents and keep them for at least that long. If you do still use paper receipts, make sure you have a way of storing them so they’re easy to manage and find when you need them. I also advise taking a photo of your receipts or scanning them so you can add them to your digital storage system and you won’t have to worry about the print on them fading over time.

Create your budget

Your budget is your plan for success. It shows how much money you expect to bring in and how much you might spend in a given period. Over time, with your budget you can anticipate times when your profits may be higher and times when you may have a surge in your expenses. Additionally, bankers, investors, and other stakeholders may ask for a budget when they consider financing your business. Knowing where your money is coming from and going to builds confidence and motivation for you as the business owner.

There are other strategies that can help you run your business and set yourself up for financial success. Those include automating your bill payments, having a cash flow statement, and choosing the right business structure for you. But as a place to start, creating a budget, keeping your receipts, adjusting your billing strategy and drawing a salary, that you keep in a separate bank account, are important first steps.

Want to learn more about how we can help you stay on top of your finances? Book in a call and we’ll look at your situation together.