The Small Business Money Habits To Set You Up For Success
A new financial year is upon us and it’s the perfect time for small businesses & freelancers to get ahead with finances and put in place positive financial habits & processes to ensure a successful year ahead and a stress free EOFY come 2022. We asked Jodie Dean, owner of AccountArts, a boutique financial bookkeeping & consulting firm dedicated to the arts, creative & design community to share her top tips to ensure you’re on top of your finances for the year ahead. Get your notebook ready, trust us, you will want to take notes!
1. Know Your Strengths
Most creatives start their own business because they want to do something they love and earn a living doing it. Never have I heard one of them say it was because they wanted to start a bookkeeping business. Always make sure this “do it yourself” approach is for the right reasons. Is it to save money? Is it because you love to work with numbers? There is far more to handling business finances properly than just downloading information from a bank statement and unfortunately most people discover this when it is too late and are then out of pocket a considerable amount to get their accounts back into order. My recommendation to all my clients is to ask themselves “Why not find more time to do what you love instead of what you don’t?”
Hiring a bookkeeping professional will ensure you are getting your business set up properly and they are a trusted resource to have as your business grows.
2. Separate Your Finances
Do you treat your personal and business accounts as one and the same? This is a common mistake a lot of creative businesses make. It is vital to keep your personal and business spending separate, this will aid you at tax time and will give you a more accurate idea of how much or how little profit your business activities are actually making. Always when starting a new business it is a great idea to start a separate business account, a dedicated credit card or debit card which is solely used for business purposes only and speak to a professional who can guide you on the best way to separate your funds.
3. Pay Your Tax
Keeping your head in the sand is not a sound tax strategy and ignoring your taxes will most definitely not make them disappear. Not knowing what taxes you need to pay, the various due dates for lodging your tax activity statements and when your tax payments are due are common issues often resulting in late payment fines and interest penalties. It is also vital from a cashflow point of view to ensure you are not spending money that in actual fact you may owe as tax.
Smart business owners must understand their tax obligations each month, each quarter and each year. Don’t be embarrassed to ask for help from a tax professional to help review your current practices and help put in place systems that actually work. Remember 80% of your success can come from repeating things that have a proven track record of working, if you have a system that works over and over again the more successful you will be.
If you fall behind in your taxes don’t just sweep it under the rug, talk to a professional to gauge your complete tax picture - the tax office offers help to viable businesses who are having trouble meeting their tax payment obligations including flexible payment plans that align with your cashflow and interest free payment plans for activity statement debts. The outcome is usually much better than what you are led to believe.
4. Know Your Cashflow
One of the most common questions my clients ask me – “where did all my money go?” If you ask yourself this question don’t worry you are not alone. As small business owners we are built to automate, we have services and fees that are automatically deducted each month and soon enough you find yourself in financial oblivion.
A great bookkeeper can give you a crystal clear picture on exactly where your money goes each month. People tend to forget about recurring expenses and you would be surprised how many time poor business owners even bother to look at their bank statements, by just doing this step alone can save business owners thousands of dollars each year.
For all of my new clients and especially those who require a better understanding of how they are spending their money I like to track their expenses for a three month period, they are always amazed at what they learn even in this short timeframe. I itemize their expenses by category which means they can see what expenses are costing them the most, this identifies any negative trends early, where you can cut costs and we can make corrections before it becomes a serious problem.
5. Ask For Help
Most creative people think that bookkeeping is a hassle, they hate paperwork and tend to put it off until it gets completely out of hand. The biggest problem with this is that you tend to lose historical data that can be extremely useful in making decisions about the future.
It is much cheaper and smarter to hire a bookkeeping professional from the beginning than it is to pay someone to fix the books once things are out of control. If you want your business to grow it is imperative to have people you trust to offer an outside perspective.
Remember that as a creative you get paid because you are amazing at what you do and the same is true for business professionals. It pays to have a team of professionals that you trust and can help steer you in the most profitable direction. No matter who handles your bookkeeping and taxes, you can always make better decisions when you’re working with better data. Better data gives you the opportunity to make better decisions.