Out of the top 10 challenges that small businesses face the one that gives owners the biggest headache is financial planning, specifically a lack of capital or cash flow. This, according to Hubspot.com, is best remedied by staying on top of your invoicing and bookkeeping tasks. So there you have it.

Here’s our guide to doing just that…

1.   Keep your personal and business finances separate

Maintaining the boundary between your personal and business spending and finances is essential. Mixing the two can get messy and complicated; if you don’t already have separate bank accounts then do so as soon as possible. 

2.   Keep hold of everything

It’s important nothing gets thrown in the bin and that you and your staff get a receipt or invoice for all expenditure including employees’ expenses. Employees should attach copies of their receipts to their expenses claims. You should keep all records for at least 6 years as you never know when you may need to refer back to them and you may have to produce them for the authorities. Our customers benefit from a simple process whereby the can scan, send or take a picture on the move on a phone and the document reaches us instantly. It’s then assigned to the correct filing and dealt with there and then. So easy.

3.   Filing and invoicing

Keep sales and purchase invoices apart. Sales invoices should be raised and filed in sequential order, whilst there are various ways of filing purchases. Use any system you like but keep them apart. #Xero is great for this and has everything at the touch of a button.

4.   Keep up to date and top of things 

Keeping your books up to date takes time. Establish a routine, perhaps even put some time in the diary every week to update your records regularly. This keeps things organised and lessens the chances of paperwork getting lost. Raise sales invoices as soon as possible and ideally as soon as the goods or services have been despatched or provided. Discrepancies are sure to be noticed much sooner this way and you have got a better chance of remembering things from last week compared to several months ago or even last year!. Reconcile your bank accounts on a monthly basis if not more frequently to ensure all items have been accounted for.

5.   Petty cash receipts are important

Don’t be nonchalant about keeping accurate records of your petty cash fund. Each time you dip into petty cash, you must make some sort of record in order to keep track of the amount being spent. You should reconcile your petty cash account regularly. You can then spot any inconsistencies and know where your money has been going and reduce the risk of theft. Don’t leave it until there’s a pile on your desk to start it if possible.

6.   Cash and cheque payments

Banking and reconciling cheques and transactions should be done right away. This leaves less room for a bounce and keeps cash flow moving nicely.

7.   Credit control

Keep an eye on your debtors and manage them efficiently. Slow and late paying customers can harm your business by taking advantage of your “loan”.

In my book I discuss Cloud Accounting Can Benefit Your Business I discuss one of the strategic tasks a business owner needs to do is budget. This is not an easy task and requires a lot of planning, thought and a deep understanding of what your long-term business plan is. Parts of the budgeting process it will be useful to know at a high level are:

1. Number of customers.

2. Average income per customer.

3. Direct costs.

4. Overhead costs.

5. Profit

Knowing these things will greatly help you with your cash flow.

8.   Forward planning

There is nothing worse than getting a fine from HM Revenue & Customs. Have in mind potential future expenditure such as VAT and other tax payments. Business owners should try and set aside funds perhaps in a separate bank account, so that when it comes to pay those bills there is money available and no need to worry.

9.   Learn the basics

It’s a great idea to have an expert handle your bookkeeping but even a little knowledge can make a difference to you. Perhaps an emergency lands you responsible for a day or you may want to speak to your bookkeeper or accountant regarding something in your accounts, either way it pays to have a basic understanding. 

10.   Hire a professional bookkeeper

Your time is better spent growing your business and managing your brand. It’s as simple as that. Hiring a bookkeeper costs less than you might think and it’s been my experience that my clients offset the cost of hiring one many times over in productivity and efficiency. We know the tricks, we’ve seen the pitfalls many times and we are faster and more effective at navigating issues. leaving you free to build your business with peace of mind.

Conclusion

Knowing your finances and keeping on top of your paperwork really is key to a smoother planning and forecasting system for your business.

Leave us a comment below if you would like a free finance planning tool to help with our own bookkeeping.