Friday, 4 Feb 2022
Starting a small business is only half the battle won. Entrepreneurship requires deep financial knowledge to manage capital and maintain a positive cash flow. Without financial management, a small business can face a cash crunch and lead to bankruptcy.
Thus, far-sighted entrepreneurs monitor their books and hire a professional bookkeeper Melbourne to keep things organised. Financial planning should be a priority for entrepreneurs as it is the fuel that propels the growth engine.
Although bookkeepers have the proficiency and skills to manage funds and identify growth opportunities, the business owner needs to understand the same to take the business forward. Thus, if you wish to master your small business finances, you must adhere to the tips mentioned below.
Most small businesses in Melbourne require funding to grow, and lenders are willing to lend to entities that have a good credit rating. The credit score of a business can be determined from its credit report that offers an insight into the credit history of the business.
It includes every detail, such as credit inquiries made by the business, debts, payments, defaults, etc. It helps financial institutions and moneylenders in Melbourne understand the borrowing ability of the business owner.
Thus, bookkeepers work on maintaining a good credit score for the business through timely bill payments, managing debts, and not applying for loans too often. Also, the entrepreneur must have a separate business credit card to avoid any confusion.
The business owner must have a clear understanding of the Company Tax, Goods and Services Tax, Payroll Tax, Capital Gains Tax, Land Tax and Fringe Benefits Tax. They must ask the bookkeeper to help them understand the taxes and exemptions that are applicable to their small businesses in Melbourne.
The financial budget created by the bookkeeper must include the estimated tax payment for every quarter, which helps in planning ahead for the tax season. Thus, it is essential to set aside cash for tax payments so that the submission deadlines are not missed, and there is no risk of incurring penalties from the Australian Taxation Office in Melbourne.
Cash flow forecasting is vital for businesses in Melbourne to understand future expenditures and income and to make informed decisions. The bookkeeper will be managing the cash flow and keeping it positive, but the owner of the business needs to keep track of the capital as well.
Thus, they must examine the cash flow statement, which helps to identify the expenses, profits, and income. The cash flow statement offers information about the availability of capital with the business that can be used for buying equipment or entering a new market.
It helps to identify upcoming payments to avoid defaults and utilise surplus cash appropriately and smartly. It also helps to avoid unnecessary spending and plan for future investments.
Savings are significant for both personal and professional life. You cannot run your business with bare minimum funds. Setting up a cash reserve should be the first thing to do to keep your business in Melbourne safe during turbulent times.
Sales can shoot up or plummet without any warning signs. Thus, it is imperative to have sufficient funds that will allow you to stay afloat during the dry spells. The focus should be on reserving funds that can help in running the business for six months without any income.
It will ensure that the shareholders, suppliers, and employees are satisfied and do not create any challenges. It is not possible to create the reserve in one day but saving even one dollar counts as a contribution. The bookkeeper must make sure that a percentage of the profits is set aside for the cash reserve account in the budget.
Overstocking or understocking can be harmful to the business in equal measures. The bookkeeper must work on identifying the appropriate stock required for the forecasted sales in the quarter and order accordingly.
The business owner should be aware of this number and should assign someone for stocktaking to get rid of damaged goods and remove them from the inventory list. The orders must be sent out in advance for high demand seasons and vice versa.
The bookkeeper must liaise with the suppliers and distributors in Melbourne to ensure that the raw material and final goods reach their destination on time and without any delay. They must have a backup supplier in place if something goes wrong so that there is no downtime, and the production and sales continue.
Bookkeepers must work on enhancing the profitability of the business by reducing costs and boosting profits. The business owner must also work on improving productivity. Sales can be increased by finding new customers and upselling to existing customers.
The efficiency of the organisation can be enhanced by evaluating the strengths and weaknesses of all the employees and monitoring their performance. They must be trained to use their strengths and get rid of their weak points.
The high-performing employees must be appreciated and recognised with incentives to motivate them to work to the best of their ability. The business owner must further identify the best growth opportunities and grab them to make progress.
Business owners need to create a safety net around their entity to protect it from financial problems and deficits. Thus, they hire bookkeepers in Melbourne, who play a vital role in managing the funds and making the business a success.
