Your first year in business – you’re on your way, now to stay afloat…
Your first year of business can be a mixed bag. To be your own boss is quite exhilarating, but it’s also hard work with a never-ending to-do list.
You’ll realise quickly that you will make mistakes, but that’s OK! That’s how you learn.
As a bookkeeper, I love helping new businesses get off the ground and start life on the right foot.
I ran through my top tips for the beginning of your business here if you need a recap.
Now that you’re set up and trading, there are still some essential tasks to undertake to make sure your finances keep you afloat.
Starting your endeavour off with sound accounting and bookkeeping practices means you reduce your risk of running into financial trouble – which is the leading cause for businesses folding in the all-important first year.
1. Open a tax saver account to put away funds
The biggest issue I see as a bookkeeper is people not being prepared for their tax obligations.
Your cash flow needs to account for a myriad of tax, reporting, GST – all the un-fun things, as one of my clients likes to say!
Many businesses put on blinkers and ignore tax obligations, and this spirals out of control very quickly.
I encourage my clients from early on to open a Tax Saver Account and put aside the necessary amounts at the end of every month to have the funds available to pay relevant business tax, staff super and personal tax obligations.
2. Consult an accountant to see if you need staff, or contractors
Owning and working in your own small business can be tough in the beginning.
Do all the work yourself and risk burnout, or hire staff and risk there not being enough work or not being able to pay them.
Hiring contractors is often seen as a happy medium, but it may work out more expensive in the long run and have hidden costs and penalties you don’t realise.
Have a chat with your accountant about what your business is better off doing long-term. It’s also important to have an idea of how you want to grow your business so you can expand and hire without added stress.
3. Regularly track against your projections
We ran through setting out a detailed budget in our first article, to help prepare you for what you needed to make, spend and save during your first year.
But it’s important to track your current situation against your projected budget regularly. That way you know how you’re performing.
It’s very tempting to put the blinkers on and not analyse your costs, but it will do you damage in the long run.
Sometimes the solution to cash flow problems can be simple if they are caught early – so always look and analyse your numbers, and get your bookkeeper to run you through a profit & loss statement.
4. Think about the future of your industry
While this tip isn’t strictly related to bookkeeping, it is vital to be aware of external factors in your industry.
Ask yourself where your industry is heading, whether technology changes will affect your industry, what issues your industry is facing and what it will look like over the next 20 years.
While all these questions may not seem relevant to your everyday activities, it’s important to put time aside every quarter to look at and research changes like new technology or laws that may alter your current trajectory.
These types of tasks are part of working on your business, as well as in it.
Once your business is operating, and you’re adjusting to your new life as The Boss, it can seem like a hassle to add these tasks onto your overflowing plate.
But, just as setting yourself up correctly saves stress, being on top of your ‘big picture’ and making sure you’re performing as expected can be the difference between success and failure.
PART ONE: The beginning of your journey
PART THREE: Laying the foundations for future success