Businesses become a success because it is something you love and therefore work hard at it. Unfortunately many people do not love the accounting/financial side of a business and yet this is absolutely crucial to your success when first starting up.
There are three top tips for start ups, they are:
Let’s look at these three tips in detail for you.
Understanding Your Financial Story
So when we talk about your financial story we are talking about knowing what’s behind every figure on your financials. While you’re not expected to be an accountant you do need to know basic accounting terms so that you can read the following information.
The Balance Sheet – this gives you a brief look at your financials on a specific day. Ie how much you have in assets and how much you owe.
The Cash Flow Statement – this illustrates how changes in both the balance sheet and income statement affect cash in, an important tool to help understand that you will be able to pay bills, wages & super and also maintain payments to ATO etc on time
The Income Statement – this shows the business’s progress and profit in a set period of time.
Once you understand these then they don’t need to take up a large amount of your time and you can focus on your business journey.
Keep Up-to-date Records
You will make more informed business decisions when your accounting is kept up to date so it’s really important that each week you set aside time to go over and update your finances.
Using the appropriate tools this really shouldn’t take longer than a few minutes each day, but when left it can easily get out of control.
Accurate and reliable records are also important to ensure you stay on top of your Tax and GST compliance and thus maintain a good relationship with the ATO.
Create and Maintain a Budget
Try and plot your expected income and future expenses. This allows you to foresee your future cash flow and make decisions based on it. Creating a monthly budget until the end of your first financial year can help with this.
Compare your planned figures against the real ones as they happen each month. Monitor your actual progress against your plan and adjust it where needed to improve future performance.
When preparing your budget make sure you do it for the whole year so that you can account for annual expenses as well as other quarterly and monthly expenses.
Start ups in any industry have one thing in common you need to plan, to quote Winston Churchill, “failing to plan is planning to fail’.
If you have any questions regarding these tips please contact our office by phone or email to speak to one of our accountants.
