Entrepreneurs and small business owners are often quite comfortable with taking significant risks for the sake of their company. However, with their businesses being the largest, if not the only asset and a singular source of income, following the basic personal investing and finance guidelines becomes that much more important. On the other hand, failing to do so can lead to business owners having to take increasingly larger risks and endanger their business and only source of income. That said, here are five financial tips that every business owner should use as a practical guide regarding their finance and investment options.
1. Do a financial audit
A carefully planned and executed financial audit can mean a world of difference for your business. Information about the income and subsequent expenditures needs to be carefully revised and appropriate solutions set in place in order for your business to thrive. Look for any patterns in expenditures, find those your business can live without and focus on doing as much as you can with your current state of income, before looking for ways to increase it. You should also consider going paperless and try out a cloud-based expenditure tracker. This eliminates the need for paper waste around the office and sends a clear message that your company cares about the environment.
2. Cut down on unnecessary costs
Business routine, if not properly set up, can significantly decrease your company’s progress. There are numerous small expenses that businesses make on a daily level simply because they don’t have the time to do a proper audit and assess their company’s spending habits. Incentives can be an excellent way of attracting new customers during the initial stages of your business, but once the majority of your customer base has already been attracted, cutting down on the said incentives and discontinuation of specific services can improve your company’s financial statements without actually affecting the satisfaction of your customers.
As your business grows and starts tackling different and more diverse projects, chances are you’ll one day be in need of additional workforce. Instead of hiring a full-time employee, it may be a better idea to simply outsource specific tasks. This can really be helpful with financial tasks, such as bookkeeping, accounting and writing tax returns, as business owners tend to spend a lot of time focusing on these two specific areas. Finding an affordable and professional tax accountant in Sydney is a far better choice than wasting both your time and company resources trying to accomplish these tasks all by yourself.
4. Diversify your assets
One of the most significant aspects of well-executed investment scheme is, of course, diversification. What most business owners tend to do with their newly acquired assets is to invest them back into their own business. This might sound good on paper, however, concentrating finances into a single asset is a risky, if not a bad business move. Investing outside your own business does not only decrease the risk of all your funds disappearing in case anything happens to the company, but also strengthens your business portfolio.
5. Focus on the seasonal cash flow
It’s important for business owners to fully understand exactly how seasonal flow of cash works for their company. For example, accounting firms experience the largest spike in business during the tax season. This spike is then followed by a decrease in conversions, which means these firms need to have a back-up financial plan in order to cushion the impact during these slow periods. Every business owner should know when and why their business experiences an increase or decrease in revenue and adjust their financial planning accordingly.
Performing a financial audit is just the first step in improving your business and increasing your revenue. Most of the tasks following the audit can be accomplished by business owners themselves, but this doesn’t mean that they should. Business owners are entrepreneurs and not accountants, which is exactly the reason why outsourcing financial help may be a better idea than wasting your time and energy trying to micro-manage every single aspect of your company.