Top 3 Tips For Getting Your Business Finances Sorted
Emma Bowdler
I’m a cheerleader for women and an accountant bursting with personality.
Whether you’re just starting out (congrats!), or you’re on the verge of levelling up your business game (you go, queen!), chances are that at some point your business’ finances will put a few grey hairs on your head.
While we’re all for rocking those greys, it makes us sad to know that more than half of small business owners say their business’ finances have impacted their mental wellbeing in the past 12 months. Indeed, even before the pandemic, 1 in 4 business owners reported feeling stressed and anxious every day trying to manage their business finances. Clearly, it’s not just Jan that’s unhappy…
We are on a mission to change that by helping women all over the country kick some serious business goals. And, in all our years of building successful and scalable businesses, we know that there’s truly no better place to start than by getting your finances sorted.
So, if you’re ready to build the business of your dreams and gain the clarity and confidence that comes from dotting the ‘i’s in ‘invoice’ and crossing the ‘t’s in ‘tax time’, then we got you. Let’s dive in with three things you absolutely *need* to nail if you want to get on top and stay on top of your business finances:
1. Separate Your Accounts and Stop Living Out of Your Business Bank Account
The number one ‘mistake’ we see business owners make every day is not separating business and personal finances. It’s a tricky one because you might be a sole trader, your business might have started as a side hustle, or you might think you’re too small to have separate finances – but if there’s one thing that causes major headaches, particularly at tax time, it’s not having separated your business and personal finances.
From day one (or day one thousand and one, no judgment here), it’s important to keep your business and personal finances as separate as you can. One way to do this is to have separate bank accounts for your business (even if they’re with the same bank), and we recommend creating at least these three:
- An everyday expenses account – similar to your everyday personal banking account, this is where all your invoices or sales get paid into and all your expenses, like your client lunches or stock purchases, come out of.
- A tax account – calculate regularly (or have us do it for you!) how much you will likely need to pay in tax and GST, if you’re registered. Pop it aside in this account, so that there are no nasty surprises or sleepless nights come the end of the quarter or financial year.
- A business buffer account – like a personal emergency fund or savings buffer, your business needs a buffer too that can cover 3-6 months of operating expenses if you were to have a few lean months.
As our Founder and women in business cheerleader Emma says: ‘figure out how much it takes to keep your business lights on each month, and go from there!’
Figuring out how much it takes to run your business each month is much easier when you have the right software setup. If you want to get started using Xero, Quickbooks, Reckon or MYOB – book a session with our team!
2. Get Real About How Your Business is Going
One thing that we all need to do as business owners is get our heads out of the proverbial sand, which is lucky because that sh*t gets e.v.e.r.y.w.h.e.r.e! If you are serious about getting your finances sorted, you need to know *exactly* what is going on in your business, from the amount you’re making on each sale to the amount you’re paying to have your accountant on call. (Hint: look for a fixed fee accountant so those little questions throughout the year don’t cost you a bomb!)
In order to know what is really going on in your business, you need to know:
- Is the business hitting its revenue targets?
- Is it growing or stagnating?
- Are our costs too high and our margins too low?
- Is the business making me happy and the world a better place?
The first step towards making change is identifying what needs ‘fixing’ and why, i.e. figuring out how you got there in the first place. If, once you’ve looked under the hood, things are in pretty good shape – make a plan to do more of the things that are bringing you success. If it’s looking like your business engine needs a bloody good tune up, then make an appointment and we can help you do just that. You don’t know what you don’t know.
3. Revisit Your Offerings and Figure Out if They’re Profitable
A lot of businesses are very happy to squawk about their revenue – i.e. how much money they generate. ‘We turn over six, seven, eight figures…’ – sounds impressive, right? Not necessarily.
At The Women’s Accountant, we see revenue as a vanity metric that doesn’t tell you a whole lot about how your business is *actually* performing. Instead, the key thing we want women to be focusing on is: profitability, and more specifically – gross profit margin and your break even point. These three figures are some of the most important ones to nail for your business.
Essentially, to get your finances sorted you *need* to know if there is a particular product or service you are offering that isn’t making you money. If there is – ditch it or fix your pricing, and instead prioritise the things that make you moolah and make you profitable.
A simple and common way to figure out if your business is profitable is by calculating: Revenue (the money you generate) – Expenses (the outgoing costs of running your business as well as what you are paying yourself*) = Profit (the money you’re left with at the end). Basically, if you have a positive number left, you’re profitable, if you don’t, you’re not!
* Don’t forget to pay yourself! Profit is what you earn after and above what you are paying yourself…
But what if you could take it one step further by calculating your gross profit margin and you were able to pinpoint where you ‘break even’ and tip into profitability? Of course, you can, and if you need a little help we’ve got your back!
BONUS TIP:
Finances are an ‘Every Week’ Kinda Thing.
Successful business owners carve out time every.single.week to get their books in order and work on their business, not just in their business. Be it a weekly date with Xero (hella sexy!), a self-directed cash flow reflection to take a squiz at what came in and what came out of your business that week, or even a ‘joy audit’ of all the things that made you happier than an Emma with a cocktail in her hand – you have to make time to ‘do’ the finances, or the finances will do you, my friend.
From cash flow to profit and loss, and even those pesky BAS submissions – there are plenty of things that require you to keep your ‘finance finger’ on the pulse when you run your own business. It ain’t easy, but it also doesn’t have to be so hard.
We take pride in being known for dishing up the no-BS, no-fuss financial tips to give women minimum headaches and maximum peace of mind when it comes to their businesses.
If you want more from where this came from, book an obligation-free strategy session with us and be sure to join our women in business cheer squad on Facebook, LinkedIn and Instagram.
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