How to Manage Small Business Finances: Some Simple Daily Habits

Kirsty Young Advice and Tips

This is a massive topic, but here’s the good news.

As a small business owner, there are some simple daily habits that can really help raise your awareness of the key numbers and help improve the financial situation overall.

Obviously you could do a whole heap of tasks, but we know that realistically, many owners are doing next to nothing on the finances on a daily basis. So, we wanted to give you some small, key tasks to start with. (We will expand on these in later blogs!).

Let’s get started!

 

1. Do 15-30 minutes ‘book-keeping’ a day

Now that sounds manageable, doesn’t it? And it needn’t even take that long! If you outsource your book-keeping as many owners do, use this daily time slot to:

    • Forward the relevant paperwork to your book-keeper (hopefully digitally!)
    • Answer any queries they may have

If you are doing your own book-keeping, then doing just a little every day will really help. There is nothing worse than having a pile or paperwork and transactions to go through each month, a quarter or even once a year, especially if you don’t like doing it!

The main benefit to developing a daily book-keeping habit is that you have access to almost live data. Live data is important for many of the other habits discussed here, and for good decision-making in general!

There are also a lot of “Oh wow” moments with regular book-keeping, like “Oh wow I did spend a lot on (something) this month” or “Oh wow, that new bakery product is selling like hot cakes”.

If you feel the need, the need for speed, check out our top tips video “How to speed up your book-keeping”.

2. Check your bank balances

Sounds obvious we know but checking your bank account is like checking your inventory. It answers key questions including:

    • What have I got?
    • Is it enough?
    • Is there about to be a problem if I don’t take action today?

And perhaps most crucially

    • Will I be able to pay myself this month?

Checking your bank balance also helps you notice more “Oh wow” things such as:

    • “Oh wow that new customer just paid” or
    • “Oh wow, that customer has paid early, that reminds me I need to do X”

3. Check your Turnover (Sales)

As you will now be doing your book-keeping regularly(!) you will have access to timely turnover information. Even if you don’t go and look in your book-keeping records, we suspect you will have a way of accessing this information via reports that can be sent to you.

Monitoring turnover is great for awareness because:

    • It can tell you if you are heading in the right direction, or towards any goals you’ve made
    • If you give customers or clients a set time to pay, turnover is a ‘leading’ indicator of whether you are going to run into any cashflow problems in the future. In a nutshell, low sales now = low in cash soon
    • If you aren’t VAT registered, turnover is a VERY important thing to track for most businesses. The last thing you need is to end up getting caught out by unknowingly crossing the UK VAT threshold (currently £85,000 in a 12-month period at the time of writing). Having to register late for VAT can have harsh financial consequences for your business

If you look at your turnover number and think “Oh wow this isn’t going well”, hopefully it will give you the motivation to refocus your attention on selling some more. When you are wrapped in the day-to-day delivery of your business, this can be easily overlooked until it’s too late…

4. Check who owes you money

This point is sooooo neglected by many owners. Many owners don’t know the figures through simply not checking regularly, or not having easy access to a system that can show this easily.

Using technology like Xero or QuickBooks can make this task so much easier. At the click of a button, you can see immediately who owes your business money, and how much.

Understanding who owes money should prompt the following questions in your mind:

    • Is this correct, or is my book-keeping/record-keeping suspect?
    • When was the last time I chased these overdue invoices?
    • Do I have a system to remind customers/clients that their payment is upcoming / due?
    • Is it easy for them to pay me or do I need to find alternative ways for people to pay?

Obviously if all your customers pay in advance or at point of sale, this habit isn’t as relevant. If this is the case, wonderful, BUT we’d suggest then looking at your payment services. Check if they are holding any money due to you, and carefully review the fees your business is being charged, such as minimum transactions fees.

 

Your Daily Book-keeping Checklist

✔15-30 Minutes Book-keeping / ‘Paperwork’

✔Check your bank balances

✔Check your turnover (sales) figure

✔Check who owes you money

As we said, this is just the start, but like any habit – start slow and steady! Also stick at it – forming a habit takes longer than you might think:

“According to a 2021 study, it can take about 59 days until a new habit becomes automatic … Implementing routine-based and time-based cues help to increase the chances of habit formation.”

In other words, if you always check your bank balance when drinking your first cup of coffee, or do that 15 minutes of book-keeping straight after lunch, you’re more likely to remember and do it. This is also known as habit-stacking: after I do (x), I do (y).

(We know we’ve mentioned this before, but “Atomic Habits” by the aptly-named James Clear really is superb on creating habits that last).

 

Taking control of your book-keeping

Having a good book-keeping system is essential to being able to do your daily tasks easily. Even if you have a book-keeper who does the heavy lifting for you, you want to have access to their system online.

At Heelans, we offer a book-keeping service that helps you keep on top of your paperwork more easily, and also have access to all those essential numbers when you need it. For more details: