A few more tips can help even numbers-challenged newbies propel their business to success.
SEPARATE BUSINESS AND PERSONAL EXPENSES
Most new entrepreneurs merge their play money with their professional money when they start off. That can lead to a lot of confusion down the road when you’re dealing with a higher volume of cash. Suddenly, sorting through expense statements becomes a time suck. The easiest thing to do is be consistent from the get-go: use one bank account for business transactions and a separate one for personal spending.
INVEST IN ACCOUNTING SOFTWARE
Accounting software like QuickBooks or FreshBooks helps small business owners track revenue and expenses, invoices and receipts, vendor and employee lists, all with the optional accompaniment of neat, colourful labels. Transaction sheets can even be uploaded straight from your bank accounts. Far superior to Excel, software like this helps you see what your company makes and spends at a glance, and it’s beneficial for determining your business outlook and tax obligations. Plus, your accountant will be majorly impressed.
MAKE FINANCIAL PROJECTIONS
Many entrepreneurs fail to put a number to the money they expect to make. Financial projections are an essential tool to help guide your business along a healthy growth path, and they imply a commitment to meet targets. “Entrepreneurs should have a projected income every year, up to a five-year forecast with a minimum of three years,” says Garbens, adding that income statements and budgets detailing things like staffing plans and equipment expenditures should also be included.
PAY YOURSELF FIRST
A recent survey by BMO Wealth Institute found that 60% of Canadian entrepreneurs are concerned about their ability to retire on their savings. Most overlook the importance of setting aside money for the future so they can focus on more immediate needs like paying debts and funding their business. Garbens says this shortsighted planning will haunt entrepreneurs not only during retirement, but also at tax time and other times when unforeseen expenses arise. As soon as the money starts rolling in, be boring and put some of it into a registered savings account.
HIRE A BOOKKEEPER
According to a recent Sage survey, only 23% of new businesses were likely to hire an accountant. Sure, accountants cost on average of $50 an hour, but they can save you money by organizing your cash flow and finding extra tax shelters. They can even propel business growth by interpreting your numbers for growth and profitability opportunities. “If you’re a numbers person and you like dealing with that stuff, you’re probably okay DIYing,” says Garbens. “But when you’re hopelessly lost, admit defeat.”