As a small business owner, do you check the money that’s coming in and going out of your business? Are you surprised at how your funds quickly dwindle over time? Are you overwhelmed with the transactions you make such that you lose track of your current standing as a business owner?
Well, if you fall within any or all of these categories, this blog post is for you.
According to Kumawat (2017), some SMEs failed in financial management due to weak or no accounting records. They do not maintain their books of account, because they think the maintenance of books of account for their small business is worthless. On the contrary, financial management is very crucial to the success of a small business. Maintaining books of account is the process of recording and maintaining of financial transactions and information relating to a business, on a day-to-day basis. It ensures that records of the individual transactions are correct, comprehensive and updated with accuracy.
Owning your finances means becoming financially literate – understanding and making healthy and smart decisions with your money. One of the easiest ways to do that is to budget and keep records of your finances. If you want to save money, then budgeting and record-keeping should be important to you. Budgeting and record-keeping go hand in hand to help you to keep track of your money and enable you to have a spending plan for your money, so you do not overspend. Think of it as a lifestyle.
Why should you budget and keep records?
As a small business owner, your primary goals are to increase sales, reduce costs, and grow your business and one of the easiest ways to do that is to create budgets and keep records.
Budgeting and record-keeping help you to:
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Track the money coming in and out of your business
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Discover funds you can reinvest in your business
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Predict slow months so you can stay out of debt
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Predict fast months so you can meet demand
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Estimate what it will take to become profitable or break-even
How to create a simple budget and keep records
A budget can be created on paper, using spreadsheets or using budgeting apps. To start:
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Set your goals: What do you want to achieve? – Do you want to buy a car or a house, or you want to further your education, or buy some equipment or machines for your business? The goal(s) you set will determine the structure of the budget you want to create.
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Calculate your income and expenses: Find out how much you’re spending per month. You can check your bank statements or receipts for this. Also, check how much money you are earning as your salary, and even other sources of income like gifts, money from your ‘side business’ and rents.
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Total your income and expenses: If your income is higher than your expenses, then you have some funds left over to save or invest. If your expenses are more than your income, then it means you are overspending, and you need to cut down on some items on your expense list.
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Record and track your progress: Managing your budget effectively requires recording and tracking your progress. This will enable you to have a clear picture of your income and expenses and if your budget is tailored towards reaching your set goal(s). Financial management tools such as OZÈ can help you, as a small business owner, to track your sales and expenses easily. Download the app here: https://bit.ly/37sxEWA
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Repeat the process!
I hope this post has got you thinking about how to achieve your set goals with budgeting and record-keeping, and as always, be confident and own your finances!