Building good habits when it comes to finance

It’s time to get serious about the finances in your creative business. The start of a new year is all about building good habits when it comes to finance. After all you wouldn’t start driving a car without first learning the basics about driving would you!

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Learning the basics for managing the finances in your business is essential so you can plan ahead and ensure your business is successful and sustainable. If you’re familiar with Covey’s The Seven Habits of Highly Effective People you’ll recall that the first habit identified is to be proactive. This definitely applies when tackling your business finances.

Waiting until the last minute for getting your finances figured out is not going to be helpful to you or your business. So often we hear people say they don’t have the time or money to invest in setting up a proper structure for their book keeping and accounting. They tend to put off gathering together all their receipts and payment records from the past year until the week before self-assessment (or even more close to the wire over the next few days before the HMRC deadline which is where some people will find themselves now). Stress levels for those who have left their tax return to do this week will be through the roof and this is a) not a promising way to start a new year and b) not healthy to put yourself through time and time again when there are likely to be a lot of other business pressures to deal with as well.

So what are the best ways to build good habits when it comes to finance? Here are a few tips put together by Lauren, MyCake’s Marketing Manager:

Put time aside for setting up and updating bookkeeping records
I was once mid way through a session with my business mentor when I got exasperated with all his questions about the financial figures for my business. I remember saying ‘But I don’t have time to pull all those figures together‘. It’s a pretty shameful statement I know and he was not impressed. His response was something along the lines of ‘That is unacceptable, you have to make time for finance‘.
It makes life a lot easier now, especially if I am chatting with my accountant, if I know what my profit and loss figures look like after every quarter at a minimum. If you know your bookkeeping records are pretty much up-to-date by the time you approach self-assessment season your tax return should be a breeze…zen and the art of tax returns!

Be wary of freebie accounting software
We are well aware that there is a whole host of accounting software providers out there offering free book keeping services and systems but going down this route requires caution on your part. It can often be a waste of your precious time and energy. Investigate thoroughly how such a provider can offer these services for free? What happens to your financial data and business details once they are submitted? Often these free systems are extremely basic and do not allow for reporting on your accounts or they place limits on the number of customers you can add or invoices you can send out per month.
The freebie accounting software often has little or no integration with partner applications that tend to make managing your finances a whole lot simpler and easier. We would also be tempted to consider the possibility that the software may not be free forever or even functional for long!

Probe your figures
This may sound a bit intense but it really pays off to cross reference your financial figures with other data that you have available to collect and collate on customers, sales, costs and marketing sources. A regular exercise in probing your business figures will help you spot significant patterns and use them to make smart decisions.

Sources and events for advice and training

GOV.UK – Self Assessment – http://www.gov.uk/browse/tax/self-assessment

Small Business.co.uk – Five self-assessment tax return tips – http://www.smallbusiness.co.uk/financing-a-business/accounts-and-tax/2451857/five-selfassessment-tax-return-tips-to-follow.thtml

startups – Tax advice articles – http://startups.co.uk/tax/

craft central – Training programme for designer makers including finance workshops – http://craftcentralbookings.org.uk/programme/business-training

The Creative Money Manual – lessons in using money to achieve your creative ambitions – http://lateralaction.com/creative-money-manual/

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