When running a business, it can be incredibly difficult to understand your finances. However, keeping up with your business’s finances is of the utmost importance and should be one of your main priorities while running a business.
Although it can be easy to lose control of your finances, there are many ways in which you can be sure that you are able to track your expenditure, understand your taxes, and know your profits, some of which are explained below.
Hire an Accountant
One of the most profitable steps that you can take if you struggle to understand your finances is to hire an accountant. Accountants can deal with all your finances for you, and prepare you for the tax year. Not only this, but chartered accountants such as Howlader & Co build a professional relationship with you that can help you to get the most out of your business financially and ensure that your business can be tax efficient. This helps businesses to ensure that they are paying the right taxes, know how much profit they are making, and organize their finances accordingly, taking away the stress of dealing with the complicated tax system alone.
Understand Your Taxes
However, if you plan to control your business finances alone, you should first ensure that you understand your taxes as a business. Unlike during employment, when taxes are taken straight out of your payslip, running a business means that you have to maintain an understanding and submit your own taxes.
Income tax is based on the earnings of your business, and so calculating this is the first step to understanding how taxes work. However, there are many more implications which you need to consider, and these can affect how much tax you should pay.
Track Your Expenses
To ensure that you are ready for the tax year, you should track your expenditure throughout the year. This will not only help you when it comes to submitting tax forms but also means that you will know how much money you have to spend and invest. The best ways to track your expenses include using apps and spreadsheet templates to create simple and yet effective methods of tracking your expenditure.
Project Your Revenue
Not only this but when it comes to understanding your business finances, it can also be helpful to project your revenue. This will help you to adapt your business plan to the amount of money that you have available to spend, and will help you to prepare for any obstacles – or profits – you have in the future, allowing you to invest in your business accordingly.
Write Invoices on Time
Writing invoices and sending these to your clients on time will ensure that you receive payment as soon as possible, reducing the number of outstanding payments that you have. You should establish a timeframe for payment in your invoice template, as this will give you a reference point so that you know when you will be receiving money and ensure that your money is not outstanding for long. If you have not received payment within a week, then you should ensure that you follow up on these invoices.