Handle Your Money

Handle Your Money

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Entrepreneurs keep a lot of the financial details of their business in their heads. Doing so has its advantages: No new software to learn, no danger of a system crash that loses all your data, and you can tweak your budget as often as you need without sitting down at a desk.

But when you don’t have a system in place, surprises can pop up, goals can be missed and paperwork forgotten.

Getting a better handle on money can help you to make and keep long-term goals, smooth out the seasonal ups and downs of your cash flow and maybe improve your profits. It can also help you to stay out of trouble with SARS.

Here are five book-keeping tips:

1. Plan for major expenses

Why it’s helpful: You’re less likely to miss business opportunities or have to scramble for a loan.

 

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What to do: Put events like a major computer upgrade on the calendar at least a year in advance. Acknowledge the seasonal ups and downs. This helps you to be honest about the fact that it’s coming and plan for it.

2. Track expenses

Why it’s helpful: You’ll avoid missing tax write-offs.

What to do: A credit card that you use solely for business can be a basic accounting system. If you always use your business credit card for business expenses, you’re less likely to pay cash and lose the receipts, forfeiting tax-time write-offs.

Routinely jot down business trips, lunches, coffee dates and other events with cash outlays in your electronic or paper day planner. This will substantiate those items for your tax records in the event of an audit.

3. Record deposits correctly

Why it’s helpful: You may be less likely to pay taxes on money that isn’t income.

What to do: Adopt a system for keeping your financial activities straight, whether it’s a notebook, an Excel spreadsheet or software such as Pastel Accounting. Business owners typically make a variety of deposits into their bank account through the year, including loans, revenue from sales and cash infusions from their personal savings.

At the end of the year, you or your book-keeper might erroneously record some deposits as income, and consequently pay taxes on more money than you’ve actually made.

4. Set aside money for paying taxes

Why it’s helpful: SARS can levy penalties and interest for late filing.

What to do: Systematically put money aside throughout the year for tax. Diarise tax deadlines and prep time to make sure you make payments when they’re due.

Payroll taxes that go unpaid can be problematic. Cash-crunched entrepreneurs might dip into employee withholdings that they should have sent to SARS. If you mess with payroll taxes, you haven’t paid taxes due and you’ve taken money that belongs to your employees.

5. Keep a close eye on your invoices

Why it’s helpful: Late and unpaid bills hurt your cash flow.

What to do: Assign someone to track your billing. Then put a process in place for issuing a second invoice, making a phone call and levying penalties such as extra fees at certain deadlines.

Have a plan for what happens if they’re 30, 60 or 90 days late. Some entrepreneurs believe that once they’ve sent out an invoice, they’ve taken care of billing. This isn’t the case. Every late payment hurts your cash flow.

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Eileen Gunn
Eileen Gunn is a business author. Gunn has worked for Fortune and Worth magazines. She wrote Your Career is an Extreme Sport, which takes business and metaphors from risk-taking activities that encourage individuality, focus, and assertiveness, such as snowboarding. It includes tips from her career articles from the Wall Street Journal and a glossary of extreme sports terms.
  • Sandra Swart

    I would suggest that the moment you start a business, discuss it with a trusted accountant. Many people fall away running a new business, and only 6 months or a year or even longer down the road they chat to their accountant the first time, and have already missed important deadlines – with significant implications like penalties and interest.

    It is also important to chat to your accountant so you can setup your bookkeeping to fit in to their systems as well – it will cut down on accountant’s fees if they don’t have to do work that you can do for them with minimum trouble – remember you know your business and expenses better than they would.