Monitor Your Money

Author: Youth 2 Youth

So it was easy when you dealt in cash with your customers, or when you first started and you knew everyone of your customers personally, or when there were only a few customers to manage the accounts for. Now things have grown and monitoring the money side of things has become a little tricky. The survival and continued growth of your business is heavily influenced by the management of your money within that business - getting money from people who owe you, and regularly paying your own bills. This can be tricky if you don't really like numbers and have no formal knowledge in this area. See if these tips help:

Most important way to start:

Review and amend your business plan ! Look at projects for the next 2 years or so to help with your financial management.- Review and amend your business plan ! Look at projects for the next 2 years or so to help with your financial management.

1. · Make sure you regularly reconcile your bank account. If you do not know what reconcile is all about - YOU REALLY NEED TO SEE YOUR ACCOUNTANT or check out http://www.ato.gov.au/content.asp?doc=/content/businesses/25105.htm .
   
   
   
2. · Follow up any cheques that have bounced/being dishonoured. You need to be your own debt collector so pick up that phone and find out why the cheque has bounced and when you can expect payment.
   
   
   
3. · Do your banking on a regular basis. You want your cash to be moving through your business. It also means that your knowledge of your business and its cashflows increases leading to greater insight for you.
   
   
   
4. · Prepare regular monthly or quarterly reports on your businesses financial position. These can be generated from your accounting system directly. Have your accountant or bank manager read over these to then provide feedback on improvements that can be made. Make sure one of these reports is a GST table that summarises how much GST you have collected ( from sales ) and spent ( on supplies ) - otherwise your bank balance can be very deceiving without taking into account GST you have collected and have to pay back to the government in your next BAS ( Business Activity Statement ).
   
   
   
5. · Set up a credit policy. Have it written down and given to all of your debtors ( those who owe you money ). Clearly state your terms on the payment of your account eg. Must be paid within 14 days.
   
   
   
6. · Regularly compile a list of debtors ( those who owe you money ) that has a timeline on it, that you follow up as they fall due or overdue.
   
   
   
7. · Establish a "follow up debtors" policy and procedure. Eg. One week late, you send a reminder letter. 2 weeks late you send reminder letter in big red writing. 3 weeks late you call them directly etc.
8. · Regularly compile a list of creditors ( those who you owe money to ) that has a timeline on it, that you follow up as they fall due or overdue.
   
   
   
9. · As much as possible, pay your creditors regularly. There is nothing worse that your pile of bills mounting before you. If you need to, set up direct deposit on some of them so they are always paid easily, even pay early sometimes and take advantage of discounts.
   
   
   
10. · Keep an eye on the economy and trends. You may need to adjust areas of your business according to these general trends and economic activity.
    
    
    
11. · You may find yourself in the position of employing other people in your business now. This means you have certain obligations to them in regards to their salary/wages. So ensure you are managing your business with these people in mind. If income has decreased then you may need to re-evaluate your need for these people. However, it always useful to carefully and effectively involve your staff in these decisions as they may have suggestions on how to do things better.
    
    
    
12. · Update your financial knowledge. Perhaps you need to go and do a bookkeeping or accounting course at a local community college, or even go back to uni for a full Finance degree. There are many opportunities out there to increase your knowledge in this area for not too much outlay.
    
    
    
13. · Also, if you really can't stand the numbers side of the business and feel you can't get a good grip on them, then perhaps you need to look at employing ( part time, casual, project work ) a book keeper to enter your transactions and an accountant to put it all together for you. Just ensure that they are regularly reporting to you with reports, and that you trust their data entry and expertise.

** Any good accounting package has the capacity to track most of these issues for you. So, perhaps investigate investing in a good package that will mean you can effectively monitor your money and so have a healthy and sustainable business.

'Copyright 2003 Youth 2 Youth'

Disclaimer: This article is for your information, but it may not apply to or be suitable for your situation, so seek professional advice. Youth 2 Youth cannot be held liable for anything resulting from how you use the information provided in this article.