The way you capture and track financial data in your business can help or hamper your growth. Here are some simple tips to get started.
When you run a small business, it’s critical to stay on top of your finances, but what does that actually mean? Here are some straightforward accounting tips to help you capture, track and learn from the right information.
1. Keep your business and personal finances separate
You’re not required to open a separate bank account if you’re a sole trader, but it’s a good idea to do so. This will make it easier to balance your books, prepare P&L statements and file your taxes without having to filter through a lot of personal transactions. While you’re at it, you should consider opening a business savings account where you can set aside funds for your tax bill, future investments and in case of emergencies.
2. Record your day-to-day expenses and revenue
It’s important to keep a thorough record of your day-to-day expenses and revenue so you can see what your current financial situation is and whether you need to make any changes to improve profitability. Separating your expenses into variable, fixed, intermittent and discretionary categories will help you identify the areas that you need to address.
Depending on the accounting software you use, this information could be pulled automatically from your bank account, but you’ll also need to save copies of all your receipts and invoices for tax purposes. Try adding notes directly to your digital copies to remind yourself what the receipts were for. This will come in handy if you ever audit your books in future.
3. Pay extra attention to high-cost expenses
Labour costs tend to be one of the biggest expenses for most businesses so you’ll want to make sure you’re getting a good return on investment. Time-tracking software can help you understand how much certain tasks are costing the business, and you can see whether you’re over-resourced by looking at your cost of wages in relation to revenue.
Inventory is another major cost, and if items can’t be sold because they’ve gone missing or have been stolen, it could have a big impact on your finances. Keeping track of the date each item was purchased, the stock number, purchase price, sale date and sale price in an inventory or order management system will help you spot any issues early.
4. Compare your P&L statements on a regular basis
Whether you create monthly, quarterly, or yearly P&L statements, you should compare them on a regular basis to get a sense of how your business is tracking. To get the full picture, you’ll want to look at your P&L statements in conjunction with your balance sheet and cashflow forecast.
How hummpro can help
A buy now, pay later app, hummpro can help you keep your personal and business finances separate, track your spending and manage cashflow. Unlike a bank loan, you don’t need to provide a personal guarantee or collateral to access funds, and a mobile app makes it easy to stay on top of your repayments. You can also use it to pay for the accounting tools and software you need to run your business.
The right accounting tools can help you capture the data you need to understand your business, and you can pay for them with hummpro.