New year’s resolutions aren’t just for January 1st. The start of a new fiscal year is an opportunity to start afresh and make positive changes to the way you manage your money. As a business owner, it’s important to handle both your personal and business accounts well, since credit providers take your personal score into consideration when reviewing business credit applications. Here are ten ways that you can better manage both your personal and business finances in the new fiscal year.
1. Do Your Research
You don’t have to spend three years training to become an accountant, but it is crucial that you understand the basics. It’s worth taking some time to do your research so that you understand basic terminology and processes. This makes it more difficult for cowboy accountants to take advantage of you.
2. Create a Realistic Budget
Sitting down and creating a budget is no one’s idea of a good time, but it’s essential for good money management. You need a realistic budget for your business to prevent overspending and plan for the future. It’s equally important to create a personal budget too, as this will help you maintain a healthy bank balance and prevent credit usage, which leads us on to the next point…
3. Avoid Personal Credit
As a business owner, there are always times when you’ll need to use credit. In fact, it can be difficult to grow and manage your cash flow without it. However, it’s vital that you borrow responsibly and make timely repayments.
When it comes to your personal finances, however, it’s wise to avoid credit where you can. Make sure you pay off your credit card well before the deadline rather than carrying an outstanding balance over to the next credit cycle. This helps you to maintain a good credit score and avoid accumulating debt.
If you do need to use your credit card, avoid using over 50% of your limit and always pay the balance off as soon as possible.
4. Create a Calendar
In both your business and your personal life, it’s always worth keeping a close eye on which bills are due and when. As a business owner, there are bills, staff, subscriptions and suppliers to pay and it’s wise to keep track of these dates in a financial calendar so that you can make sure you have enough cash available.
It’s also wise to create a financial calendar in your personal life, as this allows you to avoid using credit and even squirrel away some extra funds into your savings account.
5. Review Transactions
It only takes a few minutes each day to check your personal and company transactions. This allows you to maintain an awareness of how much you’re spending and manage your cash flow well. Furthermore, you’ll be able to see where money is being wasted and cut down on costs accordingly. When you review your transactions each day, you’ll also be quickly alerted to any mistakes or problems and resolve them quickly before they grow out of hand.
6. Create an Emergency Fund
You should always have a safety net. There will undoubtedly be unforeseen costs and emergency expenses - and they usually occur at the worst possible time! Create a cash reserve to cover these expenses so that they don’t create cash flow problems and threaten the financial health of your business.
It’s fine to have an emergency credit card or line of credit, but you should also have easily available emergency funds so that you don’t have to use credit every time a piece of equipment breaks or a client is late to pay.
New Year, New Money Management
By following these simple tips, you can prepare yourself and your business for success in the new fiscal year. However, if you’re struggling to manage your accounts and are feeling stressed, it could be time to hire a quality bookkeeper who can reduce your workload and save you money through careful financial management.