Money management in small businesses such as interior design companies can be confusing and hectic. You need to keep balance and order between your expenses and profit. The problem with managing money in interior design companies is that they deal with different vendors and have operating expenses, as well as having to keep an eye on income taxes. Many business owners believe that the money juggling will become easier after enough practice, unfortunately, that’s not the case. This guide will offer you a strategy to manage the finances effectively.
The main problem with a bank account is that the traffic of incoming and outgoing funds is heavy. This heavy traffic of funds will confuse you in calculating each transaction separately and knowing what the money in the account is for. In order to manage your money better, you need four bank accounts with a different purpose for each one. It will take time and effort to set up these accounts, but in the long run, it will be beneficial for your business.
Monitoring your financial books is a daunting but essential task. You should set aside time each day or month, based on the size of your company and your schedule, to review and monitor your books with your bookkeeper. This approach will make you familiar with accounting terms and the finances of your business. If you are not good at math, accounting can seem complicated, if so, you may need to hire an outsourced financial controller to help you or the CFO in managing your finances. Book monitoring can prevent financial crimes, wasteful spending, and embezzlement.
Divide and Conquer
Now that you have set up your bank accounts and book monitoring, it is time to assign these bank accounts for different purposes. The four-account structure will operate as the following:
This account should contain all the money you need to run the company. It should have enough money to pay for rent, electricity bills, phone lines, printing costs, payroll, ads, and any operating expense you can think of.
When you receive payments from your clients, you should set aside the money that will be paid for vendors. These funds will ensure that you won’t be short on money when you are paying for the products and services of a third party that will complete the client’s job.
There is nothing worse than when it is time to pay your taxes and you don’t have enough money in the bank. You should set aside income tax and any type of taxes you will owe for your government in this account.
The last account is to enjoy the fruit of your labor, after paying everyone everything they need, you can use the money in this account to reward yourself for the hard work you have done.
Finances can be extremely easy if they are handled well. All you need to do is to break down this huge task into smaller doable tasks. You will limit your losses and you will know all aspects of every expense you need to pay.