What’s in the tin?

When I was a kid my Mum had a special money box with separate slots and compartments to save for each bill. It’s how she taught us about budgeting.

These days I have software. As an accounting geek I use Xero for my household accounts as well as for my business accounts. It helps to show where my money has gone but doesn’t stop me spending it in the first place. This is the downside of historic or retrospective accounting.

Having a budget is about what you expect to spend in the future as well as what you expect to receive. It constantly amazes me how few businesses have any sort of budget or plan (and that includes accountancy and bookkeeping businesses) when my poor mother was so diligent about making every penny stretch as far as it could.

What I do find particularly useful is the savings spaces on my Starling bank account. I use the Profit First principles* and move money across every Friday. This helps me to save for salaries, any large bills, VAT, corporation tax and my own pensions and dividends.

It is also useful to try to keep a three month buffer in your business. This may feel like a lot but it buys you time to make decisions if you’re taken ill and unable to work or while waiting for government support in a pandemic.

How do you control the finances is your business?

*Profit First by Mike Michalowicz is a great principle. You only need to read the first couple of chapters to make a huge difference to your business (the rest of the book just goes into more detail)