Are you in control when it comes to spending in your business? Do you consider implications on your cash flow when making purchases or do you buy without thinking? A third of businesses fail in their first few years due to poor cash flow management. Being sensible when it comes to spending means you’ll keep your cash flow nice and healthy so you’re more likely to be successful.

Every business should have a budget for controlling spending. Expenses should be monitored regularly so you know exactly what’s leaving your business account. Reviewing your regular payments is essential because you may be paying for things you no longer need. Having that extra cash in the bank will come in handy. You may be shocked to see how many things you are paying for each month.

Once you know how much you’re spending each month on essentials you can put a budget in place. The budget you set must allow you to save, pay yourself and employees if applicable and your suppliers. This should also leave you some money in the bank. If it doesn’t this will highlight that your budget needs reviewing. 

How can I set a budget and stick to it?

Business bank account

I can’t stress enough the importance of having a separate business bank account. This is a legality for Limited companies, but if you’re a sole trader you don’t have to keep your personal and business finances separate. However, we strongly advise you to do so because you’ll have a much clearer perspective of your spending. Your bookkeeping will be much easier to manage too. 

Process for expense recording

At Bluebells Bookkeeping we use Dext to record all receipts and invoices for our clients. Dext integrates with Xero/QuickBooks so all transactions are shown in one place ready for reconciliation. We can then produce reports to show how much you’re spending and we can help you to highlight areas where you need to cut back on spending.

Understanding your cash flow

Many business owners tend to bury their heads in the sand when it comes to cash flow. It’s common for business owners to believe if they’re making a profit then they are successful. In reality your cash flow needs to be consistent to ensure you keep out of the red. Having spells during the month where your cash flow is low can have an impact on your business. When you have a clear picture of your cash flow you can implement new processes in your business which can improve your cash flow status. If you don’t know about what’s going on then you can’t take action for improvement. It may be as simple as improving your credit control so that late payers are more likely to pay on time or agreeing better payment terms with suppliers. This is something we can address together and support you to not just understand your cash flow but to take action.

Save for tax and VAT

When setting your budget don’t forget to allow for tax and VAT. You should be saving a third of your income for tax and if you’re VAT registered save every penny of VAT you receive. The best way to do this is to have a bank account which has savings spaces.

The best investment you can make for your business is to hire a bookkeeper who can produce insightful reports from your data so you have clear visibility of your finances. We can guide and support you with your goals and help you to introduce new processes in order to streamline your business. We can help you to set realistic budgets so you’re no longer over spending.

Get in touch today and let’s make this year the best yet for your business.