Launching a new business is thrilling, but it’s easy to let the excitement push important financial practices to the back burner. You might think you can ignore the “boring” stuff for a few months, but that can leave you playing catch-up and feeling like you’re always one step behind. The good news? It doesn’t have to be overwhelming or scary. Here’s a quick list of the top 10 financial practices to set up right from the start to avoid headaches and set your business up for long-term success.
1. Know Your Tax and Reporting Obligations
Tax, reporting and lodgements are a reality for every business. To avoid fines and stress from looming deadlines, get familiar with what taxes apply to you, what needs to be reported, and when everything is due. That includes things like GST, PAYG Withholding, Taxable Payments Annual Reports (TPAR) and income tax just to name a few. Check out the ATO website to familiarise yourself with all the relevant tax deadlines and obligations or check in with your trusty accountant if you want to get expert guidance.
2. Separate Personal and Business Finances
Mixing personal and business spending might seem harmless, but it’s a recipe for disaster! Keeping everything separate helps you track your business’s true financial performance and simplifies things significantly at tax time. Businesses with messy, mixed spending usually end up paying more for their bookkeeping and accounting and can end up missing out on important deductions when legitimate business costs get lost in the mess.
3. Pay Yourself a Regular, Affordable Amount
To avoid dipping into your business account whenever your personal cash runs low, set up a regular wage for yourself—one that the business can comfortably afford. This consistency helps with personal budgeting and makes cash flow planning for the business much easier. The way to do this might vary depending on your business structure, but the outcome is the same…you’ve got enough money in your personal bank account to cover your personal expenses and you leave enough in the business to cover business costs.
4. Put Money Aside Weekly for GST, Tax and Super
Don’t let tax obligations catch you off guard. There’s nothing quite so stressful as getting a tax bill and not having the money ready to pay. And once you fall behind, it’s a stressful game of catch up that often takes months (if not years) to undo. And all the while you could be racking up late fees and interest for those late payments. Start setting aside money each week right from the start, to cover things like GST, income tax, and superannuation. It’s a small step that prevents a stressful scramble when payments are due and avoids the late fees and interest that come from playing catch-up.
5. Stay on Top of Your Bookkeeping
Maintaining accurate and up-to-date bookkeeping records is essential for understanding your business’s financial health. However, you should keep in mind that the information that you get out of your software is only as good as what you put in. You should take care to ensure you’re correctly allocating expenses and income to the right accounts and if bookkeeping isn’t your forte, getting professional help early on can save you time and prevent costly mistakes. You don’t want to risk paying too much tax because you accidentally overstated your income or missed important deductions!
6. Lodge and Pay Your Returns on Time
Late lodgements and payments aren’t just a hassle—they can be costly. The ATO usually has some discretion as to how strongly they impose penalties when business are late with their lodgements or payments. I think it’s fair to say that right now the ATO is in hypervigilant mode and is imposing any penalty they can. Our advice is to stay organised, set reminders for key dates, and avoid the unnecessary fines.
7. Plan for Cash Flow Fluctuations
Every business goes through cash flow ups and downs, whether due to seasonality or irregular payments. To avoid financial stress during the quieter times, maintain a cash buffer equivalent to three months’ worth of expenses. This reserve should be separate from the money you’ve set aside for taxes and super.
8. Use Accounting Software to Monitor Profitability
Your accounting software is more than just a tool for tracking expenses; it’s a window into your business’s profitability. Regularly review your reports to identify trends, monitor expenses, and spot areas where you can cut costs or increase revenue. Staying on top of these key metrics will help you make smarter decisions for your business.
9. Keep on Top of Overdue Payments
Late payments can wreak havoc on your cash flow! Make sure your payment terms aren’t too generous (giving your customers too long to pay) and don’t let overdue payments pile up. You should monitor and chase up unpaid invoices as early as possible. Think about setting up automated, friendly reminders and follow up regularly to ensure you receive the cash as soon as possible.
10. Consult with a Financial Expert Early On
Even if you’re handling your own bookkeeping or lodgements, getting expert advice early in your journey can be a game changer. A helpful, knowledgeable accountant can help you set up a solid financial framework from the start and can guide you through best practices, tax strategies, and financial planning tailored to your business.
Implementing these steps will give your business a solid financial foundation, allowing you to focus on what matters most— a growing and thriving business that supports you and your family. So, to sum it up for you in nice simple checklist…
✅ Know your tax and reporting obligations
✅ Separate personal and business finances
✅ Pay yourself a regular, affordable amount to cover personal costs
✅ Put money aside every week for GST, tax and super
✅ Keep on top of your bookkeeping
✅ Lodge and pay your returns on time
✅ Plan for cash flow fluctuations
✅ Use accounting software to monitor profitability
✅ Keep on top of overdue payments
✅ Consult with a financial expert early on
At Wingr, our mission is to help you start your business journey on solid ground. If you’re looking for a financial partner to support you and your business, we’d love to be part of your success story. Reach out to learn how we can help you build a thriving business that supports you and your family 😀
Comments are closed.