Plan your business finances
Setting up and managing finances is essential to the success of your small business. You can learn about basic financial processes, planning for good financial management and discover what financial policies you need to be aware of.
Basic financial requirements
- Work out how much it will cost to set up your business. It is better to overestimate than underestimate.
- Plan how you will fund your business.
- Research other businesses to understand your potential costs by benchmarking your business.
Pricing for products and services
- Research your competitors to find out what they are charging for similar products or services.
- Review competitors' websites and online promotions.
- Learn more about what to charge for your products or services.
Income and profit
- Calculate key figures such as break-even point, gross profit and net profit. This will help you estimate the level of sales you need to cover costs and make a profit.
- Know your potential profitability.
- If you need to borrow money, develop a business plan for your lenders or investors, and a cash flow projection. There will also be lending criteria to follow.
- Estimate how long your business can survive without making a profit. Consider factors such as interest rates and your ability to borrow more money.
- Develop a budget to manage your money until your business starts earning income.
- Engage an accountant, bookkeeper or tax agent to help you prepare cash flow forecasts and develop record-keeping processes.
- Find out about your tax obligations.
Seek professional advice
Work with your accountant or financial adviser for tailored recommendations and advice on how to set up finances for your business type or industry.
There are many banking options available, each with advantages and disadvantages, to suit different types of businesses.
A transaction banking product provides day-to-day banking facilities accessible online.
This option is suitable for a wide range of business types ranging from sole traders to larger companies. Any company that deals with cash or invoices can benefit from a transaction banking product.
Most transaction products will provide:
- cash availability at ATMs
- EFT payments online
- same-day payments
- accounting software linking.
Some products will provide:
- free accounts for limited transactions
- debit cards
- lines of credit
Transaction banking products often have associated fees that increase with increased levels of transactions.
Merchant facilities are the services that allow businesses to accept credit and debit card payments. They include EFTPOS terminals and online banking options.
This option is suitable for any business requiring on-the-spot payments (e.g. retail markets or cafes).
Merchant facilities allow:
- greater flexibility for customers
- contactless payments
- simple or differential rates for different types of card transaction
- different merchant facilities (e.g. EFTPOS terminals, handheld or tablet-based devices).
- can have high costs (often higher if payments are processed online)
- generally do not accept all cards
- may only settle accounts once per day
- rely on internet reliability to operate
- have cost associated with servicing machines.
Debtor finance allows your business to overcome cash-flow issues. These facilities give your business access to a percentage of customer invoice amounts before the customer is due to pay under normal business terms.
This option is suitable for businesses that have long payment terms on their invoices (e.g. 30, 60, or 90 days) or for larger and more established businesses requiring early access to funds.
Debtor facility finance provides businesses with:
- a short-term cash solution
- access to 80% of the value of an invoice within 24 hours
- an online dashboard.
Disadvantages can include:
- only available to businesses that have been trading for at least 12 months
- not all customer invoices are eligible
- cost of service fees.
Credit cards provide businesses with access to a line of credit issued by a bank that must be paid off later.
This option is suitable for businesses that have a short-term need for funds to make purchases while they wait for income.
Business credit cards provide:
- access to a line of credit that a business might otherwise not have
- a period of no interest.
Credit cards will typically have high interest rates after the no interest period. They also come with annual fees.
BPAY is a method of transferring funds online from a bank to a registered biller. The transfers can be one-off or scheduled.
This option is suitable for any business that regularly bills customers or accepts part payments, and for businesses wanting to provide a no fee, no credit card option to customers.
- enables a no fee, no credit card option for customer payments
- allows businesses to choose the timing of their payment
- provides a trusted payment method
- creates unique customer reference numbers and codes for financial reconciliation
- provides a secure platform for electronic funds transfer.
The disadvantages of BPAY include:
- some transfers may be difficult to refund
- transfers may not be immediate
- establishing costs
- transaction fees.
Managing your own finances
You can learn basic skills as a small business owner to give you confidence to manage your own finances. These skills will help you:
- understand accounting basics
- be confident in financial terms
- interpret financial statements
- identify how cash flows through a business
- understand cost of goods sold
- use financial information to make business decisions.
Skills such as budgeting, calculating taxes, setting price points and setting revenue and success rates will give you control over your own financial decisions.
Remember to clearly separate your business finances from your personal finances and accounts.
Putting together a budget can be as simple as creating a spreadsheet. At the end of every month, compare your actual spending to your budget. If it doesn't match, review where your money was spent and make adjustments for next month.
Learn more about budgeting.
Expenses are things you have to pay for to run your business, such as overheads (e.g. rent, electricity) and employee salaries.
Understanding your expenses can save you money when applying for a loan or negotiating deals with suppliers.
Learn about the costs to start and run your business.
Cash flow is how money moves in and out of your business. You can track your cash flow on a simple spreadsheet or in your accounting software. Small businesses starting out may have dramatic changes in income and expenses each month.
Record every purchase, withdrawal, cost and sale in your spreadsheet or accounting software. This will help you understand:
- where your money is going
- your highest expenses
- your most profitable products
- high revenue months or periods
- what an average month looks like.
Learn more about managing your cash flow.
Before borrowing money, compare terms, interest and fees from multiple lenders using an online comparison service or a broker. Read the fine print and understand the loan's limitations and requirements.
Find options for funding your business.
Your personal credit rating can affect your ability to apply for business loans and credit.
Speak to your accountant or financial adviser for more information on managing your credit rating.
Improve your financial knowledge
Grow your financial knowledge to help you better understand how to run your business. You could:
- review and research business books and online resources
- subscribe to finance newspapers, magazines, newsletter and blogs
- listen to business podcasts
- attend business events, including workshops and webinars
- consider enrolling in further training, including vocational education and training or tertiary education
- participate in financial education programs, events or webinars offered by business associations (such as the Business Chamber Queensland) or professional bodies (such as CPA Australia).
Use the Queensland Skills Gateway to find available training courses in Queensland.
Financial policies and procedures
Financial policies set out the 'rules' for how you will manage your business's finances. They should reflect the core values and culture of your business.
Clear financial policies and procedures will ensure:
- staff are aware of their obligations
- financial decisions are consistent and reliable
- client or employee disputes are less likely
- professional operating standards are in place.
Types of financial policies and procedures
Your policies and procedures will depend on the nature of your business. Think about your preferences for:
- who you will authorise to complete specific tasks
- cash handling and managing your business's day-to-day finances, such as petty cash and invoicing
- how you will choose and work with new suppliers
- buying and purchasing processes such as stocktake and purchase orders
- overdue invoices or accounts payable (creditors)
- sales and accounts receivable (debtors)
- engaging and managing customers or clients
- processing wages, sick leave and overtime
- business insurance and risk management.
Creating financial policies
Financial policies should:
- align with your business plan and goals
- reflect the values and the culture of your business
- explain why policies have been put in place
- be easily understood by everyone in your business.
Creating financial procedures
Financial procedures set out clear instructions under a policy and should:
- be factual, informative and detailed
- be presented simply using clear instructions and visual supports such as flow charts, images and checklists
- include references and links to forms.
When writing your financial policies and procedures:
- highlight your objectives
- involve your employees in the decisions
- write and review each day, or as you complete tasks, to keep manageable.
- Last reviewed: 20 Dec 2021
- Last updated: 23 Mar 2023