The COVID-19 pandemic has profoundly affected the different business sectors and has even shaken up the personal finances of millions of Australians. As we still battling with the challenges brought by the global pandemic, the best thing that we could do is to financially recover from the economic shockwaves and improve our financial literacy in some ways.
As a small business owner, it is important to you how you can maneuver your finances to keep your business growing even at these trying times. Here are some essential tips to help you manage your business finances. Soon, you will be able to create a contingency plan to keep your business growing.
Allocate wisely the money you have in hand
Give yourself a salary so you can stop relying too much on each sale that you make in your business. The 20% of your business earnings should be your salary (or dividends since dividends are taxed less compared to a salary). The other 20% is a bonus for employees so they have more incentive to stay and work hard. While 60% of your business earnings should be for the growth of your business. Reinvesting it [back] in the company, in new products, or another company. So that the power of compounding works for you. If you do this, you’re not commingling your money and that of the business.
Have an Emergency Fund
Have three to six, sometimes nine months’ worth of expenses for your emergency fund. This is so that you don’t worry about the short-term if you lose your job or business.
Prioritize cleaning up your debt
Debt clutters your life and hangs over you. Build-in debt repayment each month and only charge what you can sweep away at the end of each month.
To begin cleaning up your debt, it is best to start writing all of your debts down, along with their respective interest rates. From there, you can begin estimating when your debt payoff is, or figure out which debt payoff strategy, such as the debt snowball or debt avalanche, is best for you when it comes to eliminating that debt. Concentrate on what’s most important in your life, and save it.
Talk to Financial Advisors
Financial advisors help you create a plan for meeting your financial goals and guide your progress along the way. They can help you save more, invest wisely, or reduce debt.
A good financial advisor will ask you about your goals and create a plan to help you reach them. That may mean calculating how much you should save for retirement, making sure you have an adequate emergency fund, offering tax-planning suggestions, or helping you refinance or pay off debt. Financial advisors also help invest your money, either by recommending specific investments or providing complete investment management.
If you are planning to sell your business in Melbourne or sell your commercial property in Melbourne National Brokers Network offers property estimates, free of charge. This is useful especially if you would like to sell or buy a property. Just visit our website and go to our contact page.