Are you that person a week before taxes were due sorting through receipts and trying to get records up to date?
I know from experience that if you don’t make room to stay on top of your finances consistently, it’s a task that inevitably ends up on the back burner. Which is why I’m sharing on the blog the money guide go-to workflow for how to manage small business finances.
Step One: Duplicate Your Workflow Task & Assign to the Upcoming Month
It is advisable to create a workflow once, writing it down and re-use it time and again.
If you do not use a project management software you can simply print off the workflow and keep it with your planner, whatever system works best for you is the best system!
Managing finances can be exhaustive but once you keep a regular check of your finance you are more informed about the correct status of the business and the exercise will leave you feel confident about your money.
Step Two: Categorize Spending (Expenses)
Numbers don’t lie! Start by categorizing spending (also known as expenses). If you are using an accounting software make sure that your transactions are automatically added from your bank accounts/credit cards/and or payment processors. If you don’t use a bookkeeping software (or if your software doesn’t automatically pull in transactions) you can manually enter transactions in a spreadsheet like excel or google sheets.
For those of you who outsource bookkeeping, your bookkeeper will do this for you.
When it comes to categorizing your spending, I always say you want to be detailed enough that it means something to you, but not so detailed that you won’t do it. For example: you want an office supplies category, but not necessarily a paper clips category!
Step three: Input Income (Revenue)
Invoice your customers / clients. Ensure that every sales is captured. Do not wait until it is tool late, capture as it happens.
Step Four: Send Invoices and Payment Reminders
As far as payment reminders, any invoices that have not been paid by the clients, have someone in your team to email a reminder directly. Same with any online payments that have been declined, email for updated payment information. Have a workflow for declined payments as well that gets put into motion after a payment has been declined twice. Simple systems and workflows like this help make how to manage small business finances so much easier.
Step Five: Pay Bills
Setup as many bills as possible via debit order including all software subscriptions, internet and telephone, and even the credit card is paid in full automatically each month. If you work with a lot of contractors, pay their bills during your money date or setup automated payments if that option is available.
Step Six: Pay Yourself as a Business Owner
As the owner of the business, you are equally an employee in the business thus you should be under the business payroll.
Your salary and bonuses are classified as an expense line item on your profit and loss statement.
Step Seven: Reconcile Business Accounts
This is one that is often forgotten but will make your life so much easier come tax time as a small business owner. You want to make sure all the income and expenses transactions that show in the bookkeeping software match the income and expenses transactions in your bank account.
Even if you don’t use a bookkeeping software, you want to go back and double check that everything you’ve entered into your spreadsheet match what your bank account says. I recommend printing off your bank statements, it makes life so much easier! Or if you have a big screen, pull up your system records and your bank statement side by side so you can double check them.
Technically, for your business to be ready to file taxes, your accounts should all be reconciled. This ensures that your profit & loss statement is actually correct.
Step Eight: Prepare Cash Flow Plan for Upcoming Month
A cash flow plan is just a fancy way of answering “do you have enough?”
Input your starting bank balance in your business checking account (the main account), all your anticipated income and expected expenses (including your business credit card balance which you pay in full each month) and then calculate your ending balance. Is there enough? If not, you need to come up with something to sell or work to book another client! This practice gives you peace of mind and helps to ensure there is always enough.
Step Nine : Review P&L for Year Against Annual Money Plan
An important step is comparing your actual income and expenses (using your profit and loss statement) against the money plan you would have created at the beginning of the year. This is the actual benefit of bookkeeping as a business owner, it’s the strategy part! How are you tracking towards your sales goal? Are you staying within your spending parameters in each of your expense categories?
We don’t want to create a plan and then never look at it. As I teach my students, we make the plan and then work the plan! That’s how I ensure I always have enough to pay myself.
This ensures you don’t get to the end of the year with a completely busted budget or unreached sales goal. It allows you to make small adjustments along the way so you can ensure you hit the numbers you need to hit to pay yourself, your team, and keep your business going without sweating bullets.
Also, this is the time to make sure you have enough saved for taxes. Have a look at your overall profit for the year and ensure you have 30% of that number set aside for taxes. Keep a separate tax savings account to use for this.
Step Ten: Scan, File and shred paperwork
Last but not least, scan, file and shred paperwork! Luckily, most things now are just done online so you can attach the pdf bill directly to your software transaction. From there any paper you don’t need the physical copy for, you shred.
So there you have it! I hope this guide helps.
Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd – Registered Accountant and Certified Tax Practitioner.
Matsobanemetja Business Consulting (Pty) Ltd is your accounting partner that you can entrust with the bookkeping function, right up to financial reporting. We helps you keep accurate records of your business finances.
We have well trained and qualified staff that manages the aspect of both business and individual taxes.
We are the fast growing accounting service-providing agency in South Africa and across the globe.
If you need a consultation with us with regards to your business, any type of business – please reach out to us by email hello@matsobanemetja.blog
Matsobanemetja Business Consulting (Pty) Ltd offers a wide range of bookkeeping and accounting services, tailored to your business needs at an affordable price.
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Matsobanemetja Business Consulting Pty Ltd 