Mastering the balance of income vs expenses: Basics for business owners to gain financial control

For many small business owners, managing income and expenses can often seem like an overwhelming task!

Fortunately, there are several steps that small business owners can take to better manage their expenses and income, taking control of financial stability and growth.

Louis Birks is an independent advisor with Service NSW Business Connect. In addition to his own business experience, Louis in previous roles, has helped businesses manage their expenses and income to achieve financial stability and growth.

Louis has some practical advice on how to take control of your income and expenses with a few key basics that you can apply in your business today.

Create a realistic forecast and budget

“One of the easiest ways of being in control of your finances is to set a realistic forecast and budget. Start by mapping out a month or two in advance, then as more data becomes available, map further into the future. This way you are less likely to be blindsided by your business expenses.”

Ensure your budget aligns with your business goals and financial capabilities, as well as your marketing efforts and investments.

Keep a close eye on cash flow

Regularly review your cash flow statements and understand the inflows and outflows of cash. This will help you anticipate shortages and avoid debt.

The Service NSW Business Bureau offers resources to help you set up and manage your cash flow effectively.

Reduce Unnecessary Expenses

“Try and put a value on the benefit your expenses bring to your business, periodically reviewing your expenses to identify what adds value and what doesn’t”.

Look for areas where you can reduce spending without compromising quality or service.

Increase Revenue Streams

“Review your revenue streams regularly and explore where there might be opportunities to tap into new income opportunities.”

You can diversify your revenue by introducing new products or services, tapping into new markets, or forming partnerships.

Use seasonal fluctuations to your advantage

“Plan for how you’re going to work through your different sales cycles.”

Prepare for peak and off-peak seasons by adjusting your budget and cash flow projections in parallel to your sales and marketing calendar. Consider saving surplus income during high demand periods to cover expenses during slower months and activating existing customers through slow periods.

Track your finances: You can’t grow what you don’t measure.
Louis recommends maintaining accurate and up-to date financial records as the lifeblood of any business. Mismanagement of expenses vs income can lead to cash flow problems, difficulties in meeting financial commitments and ultimately, the risk of closing their business.

“There are many free and low-cost tools available to help with tracking and categorising your income and expenses, generating easy to read reports so you’re able to regularly assess where things are at and make decisions about the future.”

Here are some of his go-to reports to keep an eye on his business finance:

  • Sales reports
  • Accounts receivable reports
  • Expenses reports
  • Accounts payable report
  • Profit and Loss statements
  • Budget vs Actual report

If reading these reports is not your bag, get support from an accountant or bookkeeper to save time and money in the long run.

The ATO also has some great resources to support small businesses with short online learning modules. You can take a look here.

Seek Professional Advice

Consulting with a business advisor, financial advisor or using a bookkeeper can provide valuable support and help you optimise your financial management.

The Service NSW Business Connect program offers up to 8 hours of free, independent tailored advice each financial year, which includes support for, but not limited to, business planning, marketing, and cash flow management.

By implementing these strategies and making the most of the available free tools and resources, small business owners can better manage their expenses and income, gaining control of their financial performance and business success.

For more detailed guidance and access to specific service and tools, email Elle at [email protected] or call 0490 297 703.

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