Finance Tips for Aussie Small Business
In a recent study of 255 Australian small business owners, more than 35% reported that they struggle with managing their business finances. Worryingly, almost a quarter had suffered from cash flow issues that nearly brought them to close or go out of business.
One of the most important steps in overcoming these problems is increasing the financial literacy within the Australian small business community. In this article we share 6 tips for small business owners to start to understand their finances and get on track financially.
Separate personal and business expenses
Right from the beginning, business and personal expenses should be kept separate in order to have a clear record of the cost of doing business versus the cost of living. You should have separate bank accounts for your personal and business needs, and pay yourself a wage instead of dipping into the business account for living costs.
Use tools to keep track of your financial position
A simple Excel spreadsheet can be enough to monitor your cashflow by inputting every time you receive income or spend money for the business. You should also record all of your invoices issued or work in progress that has not been paid, as well as pending expenses. This will give an idea of cash flow over time and help you plan when you may need to decrease expenses or look for more work to cover gaps.
There are plenty of sophisticated accounting tools that will make your life easier, ranging from free to paid options. Wave Apps is a good free starting point for businesses that do not need to charge GST, and your accountant will be able to recommend other tools that may better suit your business.
Don’t forget your super
Sole traders or those in a partnership are not legally obliged to pay themselves superannuation, however this can be a trap years down the line when the retirement savings are well below the national average. If you are not yet paying yourself super, start now! A 9.5% contribution on top of whatever you pay yourself as a salary will bring you up to the national average, however if that is not affordable you should just contribute as much as you can afford.
Get professional advice
The advice of a good, experienced accountant will pay back more than tenfold over time as your business grows. They will be able to set you up from the start with good financial practices, as well as help structure your business to minimise tax liabilities and give you the best chance at operating for the long term.
Use the right type of finance to help your business grow
There are plenty of business finance options on the market, but getting the right loan for your situation is the key to using finance as an asset rather than a liability. For example, cash flow finance can help to maintain the operations of small businesses with slow-paying customers, and a line of credit can be a good option for making large purchases when cash flow is slow, as long as you have a plan on how to pay it back. Speak with a Lendfin small business specialist to see if small business finance could help your business grow.