A Simple Guide to Managing Finances for a Side Business

Although a side business is generally used for additional income, financial management must still be considered, especially if you already have several employees and involve capital so you don't experience losses. For that, some simple financial management guidelines for this side business can be used to help achieve success from a side business.

Recruiting Enough Employees

When running a side business that can be said to be on a small scale, then all excessive expenses should be avoided, including expenses for employee salaries.

Pay attention to the existing workload and then compare it with the capacity of the workers. If it is sufficient, then you should avoid recruiting too many employees.

If there are too many workers, it can reduce its effectiveness. In addition, this will also affect financial sustainability because more salaries must be paid.

Use Detected Payment Instruments

A business transaction or payment must be clearly recorded. If payments are not clearly recorded, it can lead to a reduction in income or significant losses on an ongoing basis.

In order to make the recording of a side business easier and to anticipate missed payments, it can be done by creating a transaction system using clear evidence and must be obeyed.

For example, by giving a paid stamp and company validation on the bill or invoice when the payment has been completed and keeping a copy of the bill in the books.

The next way is by way of optimization such as making a cashier system like a supermarket where all purchased items must be paid for first and then a purchase receipt is printed.

Use Clear Bookkeeping

After the transaction process is recorded, the next thing to do is to make clear and detectable financial books. In other words, it is mandatory to have clear records of all income and expenses from the side business that is carried out.

Starting from the raw materials, employee salaries, packaging, sales results and so on must be recorded clearly. Bookkeeping is useful as a financial control tool to be used to conduct periodic reviews so that you can find out business developments as well as check the profits and losses experienced.

Another thing that must also be remembered is to separate personal and business bookkeeping so as not to be confused when recording and calculating the finances of the side business.

Turning Profits from Side Business

All businesses that are being carried out, including side businesses, are of course aimed at earning income and must be re-developed. Avoid using 100% profit just for extra income.

Instead, use these profits as business capital again. With business capital that is getting bigger, then the business can also be developed even bigger or provide an increase in side businesses towards a much better direction.

Because managing finances in a side business is important, it is better to control or provide an easy-to-use bookkeeping system to record all expenses and income in the business.

Setting Up an Emergency Fund

The fate of business in the future is unpredictable and bad things may happen. Examples such as income that continues to decline due to competition to natural disasters.

All of this can put a side business in an insecure position so emergency funds or reserves are needed to anticipate these difficult times. Preferably, an emergency fund is prepared from the start before a side business is started and used wisely.

Do not use this emergency fund for situations that can still be controlled. If you experience a loss, then this emergency fund can only be used. While under normal conditions, these funds can be considered profits derived from the side business.

Monitoring Debt, Assets and Capital

Debt, assets and capital must be recorded in a structured manner because they will also affect the continuity of the business being carried out. Receivables are company assets and must be properly recorded.

If it is not recorded, it is possible that the company's assets will be lost without realizing it. Meanwhile, debts held by partners must also be recorded even though the creditor already has his own records. This is useful for preventing double payments or unilateral claims from the creditor.

Then all goods owned by the company must also be recorded in the inventory log book. Periodic inspections must also be carried out to ensure that the item is not lost.

Use Professionals

Using professionals can be an option if you are unable to cope with financial management. You can hire professionals to help manage your side business finances.

But make sure to choose one who is experienced in this field because good financial management will also affect the decisions taken in business development.

Separate Accounting and Cashier

Giving a cashier jobdesk and concurrently being an accountant is actually a big mistake. The cashier who doubles as accounting is likely to be able to manipulate the financial statements and will affect the financial condition. For that, you should work on accountants and cashiers separately.

Those were a few tips on how to manage simple finances for a side business, if you have any questions or other additional information, don't hesitate to share via the comment form.