If you’re reading this and you’ve recently launched a business, congratulations, what a massive feat! When you’re just starting out, the logistics of it all can seem a bit confusing. Generally, you have all energy poured into making money rather than managing it which makes sense. You need to generate sales so the business is feasible. But, doing the right things now can save a lot of heartache later.
Without further ado, this is what you should do to keep your business in check from the start.
1. Open a separate bank account for your business
This is my absolute non-negotiable! It can be tempting to just chuck all your personal and business money in together when you’re just starting out but trust me, that short term gain will cause a lot of long term gain. For one, the account will be messy. You’ll be more likely to miss business expenses or incorrectly claim a personal expense for a business one. And secondly, it will be harder for you (or your bookkeeper!) to manage and allocate income and expenses.
Do it now, even if your income is $0. You’ll thank yourself when your business grows.
Hot Tip – some entity structures, it’s actually a requirement.
2. Track your expenses properly
That coffee meeting with your client, get an invoice. A quick trip to officeworks, get an invoice. In fact, get a receipt for every single business purchase you make and then please, keep it, else you can’t claim it as a tax deduction. The ATO are pretty strict with expenses and they can audit your account anytime and back to a whole five years after – sometimes more. I’ve seen audits happen where the claimant forgot to keep their receipts and bam, they had to pay that money back and copped some not fun fines.
While we’re at it, please allocate your expenses correctly in your accounting software. General expenses shouldn’t be your fallback – best practice, delete it and use something more meaningful – your bookkeeper and accountant will love you for it! This will help you when it’s time to submit your BAS, tax return or anytime you’d like a birds eye view of your incoming and outgoing funds.
Hot tip – Xero subscriptions can include HubDoc, an app which will be your new best friend to keep your copies digitally.
3. Have legals in place
Longterm, this will protect you from copycats, debtors and future issues that could crop up. If you’re looking for a superstar in the field, I can’t recommend Tracey from TM Solicitors enough. She looks after all AFY legals and she has saved a few dramas from escalating.
4. Engage a BAS/Tax Agent
Unless you are trained in the field, it’s always smart to have a team behind you when it comes to tax/bas and the like. Accountants and BAS Agents work in tandem to manage your tax, income, expenditure, BAS, Super, Payroll and more.
The important piece of the puzzle is to choose agents you feel comfortable with. You’ll be chatting frequently and they’ll be privy to some really confidential information so a good relationship is key.
5. Set a numbers process and stick to it
It’s really important you understand your numbers and feel confident making financial decisions. Set up a recurring time to go through your business numbers whether that’s daily, weekly or monthly, that’s up to you. The crucial thing is you do it. Taking a peek just before tax time isn’t the way to go.
I hope this has helped and as always, if you are ready to have a savvy & trustworthy numbers team supporting you, feel free to book a free discovery call with me.