Many small business owners face a similar question after they open their doors - now, how are we suppose to manage our cash-flow? While there's not a one-size-fits-all approach to manage your small business finances, there are some good practices that you should follow.
The setup that we use at FFC is applicable for many small businesses, professionals and even freelances. Today, we're going to give you a quick peek under the hood of how we help small business owners take control and manage their own cash-flow.
For starters, you need to have a separate account for your personal and business funds. Separating your funds may offer you some protections and it will make it easier to sell your business, if you choose to. And, it'll make it easier to handle your income tax-filing.
Bottom line, although you may not need to separate your personal and business funds, you will need to keep accurate financial records for tax purposes, tracking income and expenses, and for other business reasons. You'll also need separate accounts to know your margins.
Chances are that you'll also have a debit card attached to your business checking, but you may wish to have a business credit card for your expenses. Advantages include cash rewards, consumer protection, itemized expenses, and the ability to float expenses.
Either way, you'll want to create a system for tracking income/expenses and storing images of receipts. Creating a system for organizing your cash-flow will also make tax season less painful. It's also a good idea to maintain a separate folder for each tax year.
Even if you run your own business, you need to manage cash-flow so that you can find ways to maximize your business deductions and find other methods to help maximize your return. Consider outsourcing your accounting to free up your time for revenue generating tasks.
Let's be clear ... your goal as a business owner is create cash-flow and build a living margin. So, you need to pay attention to how you receive payments. You may want to consider using a payment processing service to facilitate sending and receiving cash-flow.
Depending on what service you choose, consider one that allows you to receive payments, handle online transactions, create a payroll, and maintain your business accounting. Just make sure that the app or program is scalable and fits your needs.
Of course, you can always use a ledger or spreadsheet to keep track of your income and expenses. But with the variety of high quality and low cost software options, there is no need to try and save a few dollars when you have to do all the work by hand.
This article only covers a few things to consider when managing your business cash-flow. Your needs may vary depending on your business situation, the size and structure of your business, the type of business you run and other factors specific to your industry.
This is based on the FFC Program and more specifically, our Cash-Flow Accounting method. Feel free to use this as a simple guide to get started, but contact us if you get stuck or if you want a team of cash-flow experts to guide you towards financial freedom.