It’s so easy for your finances to take on a life of their own and quickly spiral out of control, leaving you with no idea what is going on in your bank account, how your income and outgoings are working together, or what to do to start managing your money well again. Left untamed, this can lead to a huge problem. You could end the year on a loss, struggle with your tax return or miss the deadline completely and find yourself unable to pay staff or suppliers. So, follow these steps to do something about it. Before it’s too late.
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Understand the Difference Between Profit and Cash Flow
You’d be amazed at how many business owners still confuse profit and cash flow. This is a dangerous mistake. Put simply, cash flow is literally the movement of money into and out of your business in the form of income and expenditure. Profit is what you are left with once all the expenses have left your account. This is the money you have actually made. Knowing the difference can help you understand what your money is doing, better equipping you to manage your finances.
Look at Your Finances
Take some time to look at what’s going on. Print out bank statements and account details. Go back at least six months and track your money. You should be able to spot patterns and figure out what has gone wrong. This can help you to understand your finances and stop you from making mistakes in the future.
Assess Any Debts
If you have any debts, it’s better to know about them and understand where they have come from and why. Then, make sure you don’t ignore them. Think about what you need to do next. This could be speaking to those you owe, applying for a business loan, or freeing up some income from elsewhere. Write a list of options and start working down it.
Start Keeping Everything
If you aren’t already, start keeping all of your invoices and receipts. File them in order and record all of the details electronically. This will make it easier to manage your money and fill your tax return.
Spreadsheets are a fantastic way to keep track of your income and expenses. Make sure you spend some time at the end of each week filling them in. At the end of the year, your income will be right there in front of you. You won’t need to do any math or find any invoices.
Hire an Accountant
If you are really struggling, hiring an accountant can help you to sort yourself out and save money in the future. Another option is studying an online masters of accounting. A master’s degree in accounting will help you to build a firm knowledge of accounting and finance, which will help you to grow your business and make more money in the future.
Whatever you do, don’t ignore your money worries. Confront them head on and use it as a chance to learn and grow.