When you first start a business, one of your biggest challenges will be figuring out your costs. One of the most important parts of learning your costs is closely tracking them during your first year. To help make this process easier and more accurate, it’s important to put some tools in place from the first day you do business.
Use Monthly Installments
Variable costs are much more time-consuming to track than fixed costs. Therefore, if you can work out a payment plan with your vendors to allow you to make equal monthly installments, that’s the best way to go. Otherwise, you’ll be left tracking down receipts to ensure that you enter your monthly costs correctly so that you know how to plan during your second year.
Go Digital When Possible
Rather than using paper checks to pay your vendors, it’s important to utilize digital payment platforms whenever possible. Since you can export the data from most digital payment platforms into your accounting software, it will be much easier to track your B2B payments over the course of a year. Plus, you will be able to track trends in real-time to ensure that you’re not overspending.
Keep Your Accounts Separate
Although it can be tempting to utilize a personal account to cover business payments during your first year, this could cause problems down the road. With multiple statements to look over, it can be easy to miss expenses when you’re planning your business budget for the second year of operations. Therefore, right from the start, make an effort to open business-only accounts, and then use those accounts for every payment.
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If you’re not comfortable tracking your payments yourself, it’s a good idea to hire an accountant. Today, many services offer freelance accounting services so that you don’t have to pay a bundle to hire a dedicated accountant. This will help you to make better financial decisions during your first year since you know you’ll be held accountable by someone who is constantly looking over the numbers.
In addition to tracking your expenses and payments during your first year, it’s important to note which expenses made the biggest difference in the success of your business. After all, you don’t want to be spending money on something if it doesn’t boost your bottom line. By making notes in your accounting software, you’ll have a clear record of which vendors to keep and which to jettison.