Keeping a close watch on your business’s financial situation helps you predict where your company is headed.
When you know accurately how your cash flow, revenue, and expenses are stacking up, you can begin to make more informed decisions. Monitoring your business’s financial situation also makes tax reporting more manageable.
Let’s have a look at different ways to keep your business’s finances in check.
Table of Contents
1. Keep Your Personal and Professional Accounts Separate
Few business owners use their personal bank account to run their company, especially when there’s a lack of funds. There is nothing wrong with utilizing your personal account for professional purposes, but this will make monitoring your spending far more complicated than it should be.
Having a separate bank account for business makes it easier for you to track how money is being spent. If you don’t have a different bank and credit card accounts for your business, now is the time to open one.
You can then transfer the amount from your personal to your business account to fund your company. This helps ensure that your personal and business accounts don’t mix.
2. Choose a Suitable Financial Dashboard
Keeping accounts accurate is a complex process. As your business grows, it gets challenging to keep track of every single dollar.
Fortunately, there are a variety of financial dashboard templates that makes it easier to track and monitor the company’s economic situation.
The best financial dashboard depends on your business needs. For example, if you want to track the net profit margin, then the profit margin analysis dashboard is an ideal choice. If you summarize revenues, cost, and expenses, then the profit and loss dashboard is perfect for you.
Another advantage of choosing a financial dashboard is that it is based on the cloud. This allows you to view real-time insights and access them from anywhere at any time.
The ability to make changes and keep an eye on your finances on the go provides a great deal of flexibility to you as a business owner.
3. Keep a Pulse on Cash Movement
Credit cards and bank transfers leave a trace, but not cash transactions. As a business owner, it is crucial to keep track of cash movement.
Consider producing a cash flow statement every week or month (as feasible to you). These statements give you a better understanding of cash movement within and outside of your company.
Here are a few things that are often dealt with in cash:
- Travel within the town: If you’re traveling for business purposes, the money you’ve spent on a taxi or other in-town commute should fall under the company’s expenses. Since the cost is usually low, many people prefer paying it in cash.
- Office stationery: If you’ve spent cash on office stationery, keep the receipt to include it in your business expenses later.
- Entertainment and meals: Going to lunch with your team? Buying entertainment products (like indoor games) for the office? Meeting with clients in a restaurant/cafe? Include that in your expense report.
If generating a cash flow statement isn’t your thing, consider creating a Google Sheet.
Here’s an example of Google Sheet meant to track cash transactions. The left side (green) indicates incomes, and the right side (red) consists of expenses.
Another benefit of using Google Sheet to track cash flow is that you can update it on the go (even from your mobile). This ensures you don’t forget anything.
4. Save Copies of Expense Reports
Not saving copies of expense reports is one of the common mistakes among business owners. They’re busy, and saving receipt of every purchase seems overwhelming, but it’s completely worth it.
If you have ever seen a charge for a hundred dollars in your bank statement and wondered what it was, then you’re familiar with the problems associated with inadequate record saving.
Missing expense reports might lead to tax, accounting, and cash flow issues in the long run.
One way to eradicate this problem is by saving a receipt of every purchase your business makes.
Create a designated spot to keep all the receipts, such as a box or a drawer. This will make it easy to find the transaction details at any time.
5. Consider Hiring a Professional Accountant
Hiring a professional accountant ensures you don’t miss track of even a single dollar.
They have got the expertise to play with numbers and can handle your accounts even when your business grows.
They’ll be able to identify ways to help you save money in the long run. You’ll be freed from the headache of calculations to work on tasks that keep the business moving forward.
6. Plan for the Future
Monitoring your business’s current financial situation and projecting future revenue (and expenses) will enable you to make more informed long-term decisions.
For example, if you don’t have an idea of how much you’ll earn the next month or year, but you keep on increasing the expenses, then you’ll soon run out of money. Planning for the future also includes making a budget. It shouldn’t be used to plan how every penny should be spent.
Instead, it should be used as a guide to making clear-headed decisions, aiming to keep your profits on track. This is arguably the best way to track increases to your budget for activity on various marketing channels, or to cut expansion costs. You might find that you’re spending too much on digital tool suites like HubSpot, for example, prompting you to hunt for cheaper HubSpot alternatives.
Keeping a close watch on your business’s financial situation helps identify opportunities to minimize your expenses and maximize profits. Begin by creating separate accounts for personal and professional purposes.
Choose a suitable dashboard and keep an eye on cash flow to ensure you don’t miss anything. If these things seem terrifying, consider hiring an accountant to track and manage your finances.