I was recently invited to speak at a conference about small business development, to give tips on what advice I would (and have been) giving small businesses, entrepreneurs and start ups when they want to push their idea from paper to reality.
I discovered the conference program was swayed more towards sales and marketing. There was a massive focus on sells, sell, sell to make a living and have good cash flow.
And while I appreciate the importance of sales and marketing to make a good successful business, I always tell my clients, build the foundation first, however basic so you donâ€™t have to play catch up later on.
What I mean by the foundation â€“ well the boring paper work before the invention of the product or idea.
The number crunching to determine what capital you need, investment you might have to ask, so that when your great idea is out there and someone approaches you out of the blue and says â€œI want inâ€¦ tell me how much I can invest to make this bigger?â€ you donâ€™t have to track back through piles of expenses and paper or worse, quote a figure out of the air based on what you â€œthinkâ€ is the number you need!
So, my tip before you start thinking about sales and marketing, step 1 or even pre step 1â€¦ set up a basic accounting and book keeping system.
A good accounting system is one of the cornerstones of any successful business. Regardless of where you are on the small business spectrum, here are my tips to consider!
- Get professional input
Talk about your business idea with an accountant or someone who has been in business so they can advise you what works for them and what ideas could work for you!
If you donâ€™t know anyone, send me a message! Iâ€™d be happy to spend some time to let you know my thoughts.
- Select an accounting software
Yup you might say, but I donâ€™t know if this will work so why waste limited funds on an accounting software instead of putting that into sales/marketing/product development? Totally get it!!
But an accounting software will start the practice of keeping everything, recording everything so that you always know what your cash flow is like! If you are struggling with monthly fees from well known accounting software, can I suggest trying Dukbill â€“ www.dukbill.com.au
Iâ€™ve built it for small business in mind, especially those without staff or inventory, just starting up and require something simple to use letâ€™s you do your own accounting fast and easy. Itâ€™s 100% FREE.
Otherwise I would recommend checking out – Xero or Quickbooks.
OR if you are good with spreadsheets, use that for now! But I recommend being very good and comfortable with spreadsheets to use it to a point where you need and can afford something more sophisticated.
- Cash vs accrual method When starting up â€œcash flow is kingâ€ running your business on a cash basis method to start with will improve cash flow, as you only count something as income when you receive the payment and are then only liable for the obligatory taxes at that point. Where an accrual method is counted as income once you send the invoice whether you have received the income or not, which means you will be liable for obligatory taxes straight away and when the average small business in Australia have over $10,000 in debtors at any one time it means you could be paying at least an extra 10% in tax before you receive the money.
- Get into good accounting/bookkeeping habits
Start on a positive foot! Make sure that you start a habit of good accounting and bookkeeping which to me is all about:
a. Keep everything â€“ all business documents from invoices, bills, bank statements, receipts, tax informationâ€¦everything!! The rule here in Australia is to keep it for 7 years before you throw things away.
b. File everything â€“ once you keep it, file itâ€¦and no it doesnâ€™t mean stuff it into a corner of the desk. Set up a filing system with an individual file for each type of financial document you keep. This may be for online or physical copies. Have a single file for all documents needing action and completed and make notes for each if required.
c. Enter data promptly â€“ whether you are doing spreadsheets, a ledger book or using accounting software, enter transactions as soon as possible and back up, back up, back up! Remember any accounting software is only as good as the data entered into it. Why not schedule a time every week to do this and set an alarm so you wonâ€™t forget?
d. Reconcile â€“ Make sure every month that you check all expenses and payments received with your bank and credit card statements to make sure they match company website. If they donâ€™t check it out straight away before itâ€™s too late!
e. Separate personal and business finances â€“ this is so important! Keep them totally apart from each other. You will breathe a sigh of relief come tax time!
So thatâ€™s my top four tips for setting up good business accounting foundation.
Contact me anytime with any questions!