Finance tips to help your business

Create a business model that works

Your business model is the way you or your business is going to operate and make money — however much you want to make. It helps you identify how much money you’ll need to get started and what your income needs to be to cover costs and make a profit.

You should:

• identify your operating costs, eg transport, staff, electricity, lease
• estimate your likely customers, eg foot traffic and how competitors in your area perform
• know your limitations, eg if your café can seat 20 people at a time, it limits how many people you can serve in a day
• keep metrics specific to your industry, eg the cost of a café will be different to an IT contractor.

Set a budget

Now you know how much money you need to cover your costs and make a profit. The budget is where you set your goals and a plan for how you’re going to get there.

You should:

• Set your targets — what are your profit goals for the year?
• Plan for your costs — when do payments need to be made?
• Review your budget with how you’re actually tracking monthly.

Keep track of your finances

To understand your numbers you need to know what’s happening. Accurate records help you see what’s going on in your business.

You should:

• Keep accurate and up-to-date records.
• Stay on top of your cash flow — the money coming in and going out.
• Use a separate bank account for all your work income and expenses to track your spending.
• Understand the trends — do you have enough to keep you going during the quiet periods or gaps between contracts?
• Set aside money for periodic payments, eg putting aside a portion of your income in a savings account to cover taxes and levies.
• Ask to pay bills in instalments, eg pay for your accountant throughout the year instead of in one big invoice.

Keep on top of debtors

You need to be paid for the work you do. Until payment is made, you’re financing the cost of the job out of your own pocket.

You should:

• Be clear about the estimated cost before starting the job.
• Invoice for the work you do — no one is going to pay until they have been invoiced.
• Invoice as soon as possible — your customer will consider it a lower priority the longer you leave it.
• Chase debtors regularly, eg at least every month.

Getting paid on time

Get an advisor if you need help

Finances are an important part of running a business, and sometimes this means you’ll need help from an accountant or bookkeeper.

You should:

• Get advice before making a financial decision you’re unsure of, eg expanding into a new area or buying a high-value asset.
• Ask for help if you feel like you’re not on top of things or at key times, eg when doing your first tax return or when operating at a loss.