Understanding your finances will help you to feel more confident about the decisions you make for your business. You’ll be better able to identify opportunities and anticipate challenges. Here are a few things to think about:
Start a business budget and keep it up to date
This can be a powerful tool. It might help you:
- Find out the total of your fixed and variable costs
- Compare your actual costs to your expected
- Track your actual costs against your predicted
- Plan where to reinvest any profit
You can use our financial plan template to help create your budget.
Assess cash flow
After you’ve set your budget, it’s important to track cash flow - the amount of money that goes in and out of your business. This is not necessarily your profit. Tracking your cash flow in a monthly cash flow statement might help you to see trends and forecast growth.
Take a look at other ways to manage your cash flow.
Use a business bank account
Tracking your cash flow is a lot easier when you keep your business finance separate from your personal finance. By using a business banking account and keeping your personal banking account separate, you are likely to get a more accurate view of how your business is operating. It might also assist you with your record keeping and managing your tax.
Know your tax obligations
As a business owner, you’ll also need to pay income tax and you may need to pay a goods and services tax (GST). Speak to a registered tax adviser to understand what you might be able to claim as deductions. You can use information on the Australian Taxation Office (ATO) website to find out some basic information about your tax obligations and superannuation obligations to your employees.
Keep good records
As a business owner, you’re obliged to keep records for five years for tax purposes. The types of records you’ll need to keep depend on your business structure, but generally include income, goods and services tax (GST), wages paid, and superannuation.
As well as meeting your obligations, your records will help you to see your cash flow, prepare tax returns, keep track of expenses and apply for business finance. You can use the (ATO) record keeping evaluation tool to understand what you need to record.
Next up: Forecasting your cash flow