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Many times people will use their business account for personal use. For a bookkeeper, having to wade through pages of bank statements figuring out what is personal and what is business is a very time consuming exercise, and you are paying for it. Your personal transactions are completely separate to your business transactions, so it is a good idea to keep them separate.
Your business may be small, but it helps to think big. By thinking big I mean why not manage it with the same principles as a large business. A professionally run business would pay the owners or director's a wage who would then use a personal account to transact personal transactions. A professional business would have a budget. They would not hope for the best and spend money when there seems to be some extra in the bank account. They would have a budget in place from the start of the financial year, with anticipated income, expenses and profit.
Budget is often negatively associated with tight restrictions on how much a business or a person can spend, however a good budget can leave plenty of room for planned movement. By planning anticipated income, you can then plan for anticipated expenses such as cost of sales, telephone, rent, staff and owner's wage, marketing, office furniture and profit. By planning you can generally get a good idea of how much you will earn, spend and have to pay in tax. By not dipping into your business account for personal expenses, there should be money left for the tax bill at the end of the year. A visit your accountant before 30 June is a great idea to plan for any tax issues that may arise. Depending on your plans for the following year, your accountant can usually give businesses some good advice on what to do to avoid any huge tax bills.
The great thing about preparing a budget is you can generally be prepared for things that normally often surprise. It is important to plan and prepare. To plan a budget, start with how much you anticipate earning, this can generally be estimated on past yearsÕ income and planned marketing for the year. You can then calculate your cost of goods (not applicable to all businesses) which is generally a percentage of income, depending on what type of business you have and can generally be estimated from last year's cost too. Whatever is left is what you can plan to spend on the business or keep as profit. Generally your previous year's profit and loss report can give you a good idea of how much and what you are spending on the business and can also help you see where you could save money.
Some of the expenses to consider when budgeting are: income, cost of goods sold, wages/salaries, owner's payments, contract labour, phone, electricity, insurance, postage, office supplies, rent, rates, marketing, advertising, accounting, bookkeeping, motor vehicle fuel, motor vehicle repairs, motor vehicle insurance, new office furniture or computers.
Bookmarx business services can help you plan and prepare a budget as well as help you manage your business finances.
For a complimentary one hour evaluation of your business click here
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