Managing a Business

Embarking on a new business venture? Establishing robust financial systems is crucial for turning your vision into a profitable enterprise. Here’s how you can lay a solid financial foundation tailored to the needs of female entrepreneurs in service-based industries. Step 1: Understand Financial Basics Before diving into processes, familiarize yourself with key financial concepts: Cash Flow: The movement of money in and out of your business. Profit and Loss Statement: Tracks income versus expenses. Balance Sheet: A snapshot of your assets, liabilities, and equity. Step 2: Set Up Financial Accounts Separating personal and business finances is non-negotiable. Business Bank Account: Simplifies tax and cash flow tracking. Petty Cash: For minor business expenses. Step 3: Plan for Taxes Early Tax obligations are part of running a business. Start planning from the beginning: GST Registration: Required if turnover exceeds $75,000 or from your first dollar if you are operating a taxi or limousine services business. Registered charities targeting turnover over $150,000 must also register. PAYG Withholding: For employee salaries. Quarterly BAS: Stay on top of GST and PAYG reporting. Useful Link: ATO Tax Basics for Small Business Step 4: Choose Your Accounting Software The right software can save you hours of manual effort: Features to Look For: Invoice generation and automated reminders, plugins and integrations necessary to your business, expense tracking, and BAS preparation. Consider payroll options available and what your business may need a year from now. Scalability: Choose a solution that grows with your business. Free Trials: Test tools like Xero or MYOB before committing. Step 5: Develop a Budget Budgeting is a proactive way to manage finances and prevent overspending. If you think you are ready for more sophisticated budgeting, please don’t hesitate to reach out to our team. Start Simple: List expected income and expenses. Include Contingencies: Plan for unexpected costs. Review Weekly: Update to reflect actual performance. Set up dashboards within your accounting software to suit your goals and track your financial movements weekly at a minimum with KPIs. Step 6: Track Every Dollar Accurate tracking minimizes errors and enhances decision-making. You need to be making decisions based on current finances. Bank Reconciliation: Match transactions to bank statements. Expense Categorisation: Separate personal and business expenses. Create categories for key expenses within your chart of accounts and re-assess as needed to identify areas of improvement within your expense expenditure. Mileage Tracking: Record vehicle use for tax deductions. Is your vehicle used for both personal and work purposes? Keep a logbook and track the percentage of time in a year that you used it for work purposes. We can help you keep track. Step 7: Establish Payment Policies Clearly defined payment policies ensure smooth operations. Payment Terms: Specify due dates and penalties for late payments from your customers. Providing Credit to Customers: Develop strict credit application criteria and guidelines. Define what your business can stand to offer, what debt collections practices look like and what client requirements there are to ensure you are providing credit where there is an extremely high probability of payment. Invoice Templates: Include all necessary details for compliance; ABN, your address, ‘Tax Invoice’ labels, date of transaction etc. Follow-Ups: Send reminders for overdue invoices using Xero automation tools. Step 8: Prepare for Growth Scalable systems help you handle increased complexity as your business expands. Outsource When Needed: Engage professionals for bookkeeping, admin, payroll and BAS. Monitor Metrics: Use financial KPIs like net profit margin and ROI. Invest in Learning: Attend workshops to sharpen financial skills. Final Thoughts Starting strong with well-defined financial processes sets you up for long-term success. Combine discipline, the right tools, and professional advice to navigate challenges and capitalize on opportunities. Useful Link: ATO Starting Your Business Checklist