KEEPING GOOD RECORDS IS ESSENTIAL for the success of a home business.
Start Up Budget
Firstly, to start a home business the owner needs to know exactly how much money the have to spend and exactly what they are going spend it on.
A Start Up Budget needs to be written up and true figures need to be inserted. There is no point in estimating figures for the start up because you could be out many dollars and that could make a whole lot of difference in the end.
If you are a manufacturer and you overspend at this stage you could be struggling for a long time to get on top of bills and keeping in mind that most businesses do not make a profit for a while it can be very difficult to catch up and you risk creating a bad impression with your suppliers.
In a lot of cases, even financially minded people, hate keeping their own records. When a small business owner is focusing so much on being successful, the thought of sitting down and keeping the books up to date (usually late in the evening) is the last thing on their mind.
Unfortunately, more people fail in business because of bad financial records and lack of capital, than for any other reason. It is essential to know what is going in and out of your business otherwise you will have no idea if you are making a profit or not and you need to know that. Often at the beginning a small business does not make money for several months or even years, but how would you know if you are starting to make money if financial records are not kept up to date.
Also, keeping current records helps in letting you know if you are overspending in any particular area and if that needs to be trimmed back.
Cash businesses are the worst. Cash comes in and is sitting there and if a bill is to be paid or a personal expense comes up it is just too easy to use the money that is not really profit but which will be needed to pay bills for your business.
With a cash business it is much more critical to keep tight control of your cash, your banking and your records of income and expenditure. It is so easy to say: “Oh, I’ll just grab a few dollars and go out for dinner,” after a hard days work. Trouble is, if you find yourself very busy and tired, you might start doing that too frequently and soon you will have no money for business bills.
Employing a bookkeeper is a really good idea for a small business owner because they will keep up the records and you will know just exactly where you are. Because they can be paid by the hour, it is a good investment and you can start with just a few hours and build up as your business grows. Note, that I am talking about a bookkeeper, not an accountant at this stage.
At the end of each financial year, get your returns done early by an accountant, and then you know where you stand for the next year. Accountants bills are much cheaper if your records are kept in an up-to-date and tidy fashion.
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