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5 Principles to Keep Your Business Finances in Order

May 20, 2021

Money management is complicated as it is, from tracking expenses to tax time, and keeping on top of a budget. When running your own business, you are responsible for juggling all aspects of business management, and business finances are often forgotten.  

However, if you follow these 5 principles, you will not only save yourself time but have an organized management system for your finances.  

1.Separate Expenses  

Mixing expenses is the easiest way to lose track of information. Depending on your industry and what stage of your business you are in, you may not have to separate your business finances from your personal files quite yet.  

However, it is highly recommended that you do so. Then the expense management procedures are straightforward, so there is no mismanagement of expenditures, purchases, and cash flow. 

2.Review Costs 

Review the costs of all your business expenses and tally all income sources. These are the costs to look out for:   

Fixed costs are expenses that are reoccurring business expenses that are not connected to the success of sales.  

For example, renting an office or storage space, salary expenses, equipment depreciation, and much more. The goal is to minimize fixed costs to improve cash flow by comparing rates, reducing usage, and keeping inventory.      

Variable expenses are directly related to the sales volume of your business. For example, delivery or shipping charges, sales commission, marketing needs, travel costs, and much more.   

One-time expenses are a bit more difficult to include in your budget, so it is best to create a fund account strictly devotes to one-off expenses.  

Unplanned and one-time expenses such as replacing a computer, fixing something that has broken, purchasing furniture, hiring a logo designer, and much more.   

These three types of expenses enable you to create a budget based on your inventory of all your operating expenses. Make sure you stick to your budget and keep expenses under control. 

3.Track All Expenses 

Manage receipts properly 

The best way to track all of your expenses will be to immediately upload them into a digital receipt system.  

This is an easy way to capture expenses for all employees instead of scrambling with physical receipts at the end of the month. 

Instead, use the digital receipt system attached to your business card account such as the JP Morgan Chase digital receipt manager for employees who are connected to the account or use receipt apps. 

Most applications allow you to take a photo of the receipt and upload the image so you can throw away any physical copies and store the digital information for later.  

Categorize with software 

Make sure you are using expense software that is right for your business. Apps like BizExpense Tracker or Shoeboxed are designed to track your financial information and save you time while bringing awareness to your spending habits.   

Apps like Concur and Expensify are ideal for remote employees or business owners who do lots of traveling. 

Expensify is an app that will link common business services to its account and automatically log the purchases, ideal for those employees who are on the go and need to expense their Uber ride, and other purchases.  

4.Eliminate Unnecessary Expenses 

Spend less than you earn by making sure that you periodically vet your reoccurring costs to make sure you are getting the best deal.  

Using your budget focus on places you can cut back on to save money. Look into cheaper options with insurance, reoccurring expenses, and any wholesale purchases that can be negotiated. 

Some ways you can cut costs are by looking for new vendors. You will lose money in the long run if you continue to deal with the same wholesaler or supply chains and do not consider cheaper options. 

Make sure that you have objective-based advertising campaigns before allocating funds to marketing and consider vetting your marketing costs before deciding to renew pay-per-click ads, physical marketing materials, cold calls, email blasts, or TV ads.

5.Hiring a Professional Bookkeeper 

Once you have reached a certain point of growth in your business, it is time to hire a qualified bookkeeper to manage all of your expenses, resolve discrepancies, and create reports.   

If you find that DIYing your business finances is taking up more time than you can afford despite all of the practices, you have implemented, if you find yourself playing catch-up at the end of the month, or if you find tax season particularly stressful-then it is time to hire a professional.  

The duties your bookkeeper will perform are tasks like tracking assets, and preparing reports, performing month-end closings, updating expense reports, monitoring budgets, processing payroll accounts payable, and accounts receivable.   

If properly implemented these five principles will keep your business finances in order while saving you time and money.    

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