Launching a new business is an exciting prospect, but it carries risks. Statistics from Experian show that around 50% of companies fail within the first 3-5 years. Financial difficulties are among the most common reasons why businesses go bust. Managing your money effectively from the outset can help you reduce risks and beat the odds. In this guide, we’ll share some simple steps to maintain healthy finances as a new business owner.
Budget from the beginning
Budgeting is one of the most useful financial strategies for business owners. Drawing up a monthly or quarterly budget can help you regulate spending, allocate funds effectively and identify potential problems, such as cash flow issues. Analyse transactions, keep track of spending and use your budget to set limits and highlight areas where you’re wasting resources or overspending. Update your budget frequently using accurate figures. Always remember to round up if you’re including estimated figures. You can budget the old-fashioned way using pen and paper or a spreadsheet or take advantage of budgeting apps.
Seek expert advice
Business accounting is often much more complex than handling personal finances. As a company owner, you have to comply with financial regulations, compile tax returns and ensure you’re paying the right amount of tax each year. Managing your money can be time-consuming and stressful, especially if you don’t have employees with the relevant skills and experience on your team. If you’re new to accounting and bookkeeping, it’s worth seeking expert advice. You can look for an accountant for limited company finances, outsource accounting or explore the option of hiring a part-time employee. Weigh up the pros and cons based on your needs and budget.
Make use of financial tools and software
Managing business accounts has become simpler and quicker thanks to technology and new tools and software. If you’re not already using financial planning and forecasting tools, budgeting software or tools to help you create and send invoices, track payments and inventories, manage your payroll and calculate taxes, research relevant apps, programs and platforms. You can access information online and seek advice from accountants, experienced IT support professionals, financial advisers and business consultants. Choosing the right tools for your company can save you time, energy, effort and money while freeing up more hours for core business activities.
Manage your cash flow
Cash flow problems are one of the most common reasons why new businesses fail. Managing your cash flow from the outset will help you reduce risks by spotting warning signs early and preventing challenges and obstacles, such as unpaid invoices. Issue clear payment instructions and deadlines for clients and customers, automate invoice reminders and use budgeting and forecasting software to help you determine how much you can afford to spend and allocate funds to different areas of the business.
Managing your finances is one of the toughest challenges for new business owners, especially those who don’t have accounting experience. If you’ve recently launched a company, it’s critical to prioritise effective accounting from day one. Draw up regular budgets to help you control spending and minimise the risk of cash flow issues, seek professional advice and make use of innovative financial tools and software.
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