When your finances are organized, you have a clear view of where your company is right now, and you can properly create a plan that will help you reach your goals.
Below are five personal finance tips to apply to your landscaping company.
1. Set up a budget
Budgets are important to the operation of your business. It’s nothing more than coming up with a clear financial plan for some period in the future. Not only can it help you scrutinize your monthly income and expenditures, but it can also help you prepare for unforeseen events.
As you implement your financial plan, you can rate your efforts relative to the budget. In the landscaping business, budgeting will help you predict what you’ll need in the future based on your revenue projections, such as the amount of employees, vehicles, equipment needed and more.
When setting up a budget, remember to establish your pricing strategy adjustments by type of work. Establish your wish list for additional capital needs – i.e. computers, equipment, trucks, facility improvements and so on. Also determine how many new people you’ll be hiring, along with the timeline for bringing them on board.
2. Use QuickBooks to get organized
Among small businesses, QuickBooks is the most widely used general ledger program. At our company, we use this to keep track of all our expenditures and income for the year. It’s easy to use once properly set up. As one of the most widely implemented pieces of accounting software around, QuickBooks boasts of a number of features.
The features include easy reporting, sales tracking, payroll management and precise money management. With these features, your landscaping business will be able to manage cash flow, payroll, expenses and budgeting.
3. Enhance your credit rating
Your credit rating has a huge impact on the possibility of you getting approval for a loan, line of credit and financing. With a bad rating, you might end up paying higher interest rates for credit cards or bank loans.
There are numerous ways to increase your landscaping company’s credit rating such as:
- Avoid any kind of risk that would sink the business.
- Correct any mistake on the credit report, however small it is. For instance, a wrong address.
- Avoid closing accounts. It is an uninformed choice to close off credit accounts and removing them from your credit report.
- Strive to use credit. According to experts, it’s a game that has to be played.
- Check your business credit report on a regular basis. This helps avoid errors and inaccuracies that may impact your credit score negatively.
- Limit credit usage and keep debt levels on the low.
- Pay bills on time. Paying bills late can dent your record, especially if the creditor chooses to report you.
4. Separate business and personal finances
Keeping your business finances separate from your personal finances is vital to maintaining accurate records. Separating them not only helps you reduce issues, it also streamlines your records and makes it easier to manage your finances.
Here’s how you can separate your landscaping business from your personal finances:
- Start with your bank. Open a business checking account.
- Having a record keeping software, credit card and checking account allocated absolutely for business use. This will give you most of what you need to file your taxes.
- Consider establishing a limited liability company (LLC) or an S Corp for your business.
- Try to get a business credit card. This will not only help your record keeping, it’ll also give you something to show the IRS if you’re audited.
5. Set up the chart of accounts for your business
The chart of accounts should form the backbone of your accounting system. It provides a complete listing of every account in an accounting system. When properly set up, a chart of accounts can help you get a better understanding of the financial status of your landscaping business.
The balance sheet and the profit and loss (P&L) statement are some of the most vital financial statements that will give you this snapshot. The balance sheet shows how much a company is worth. The P&L reveals if a company is profitable or not.
To ensure its efficiency, make sure the chart of accounts is updated regularly. In addition, the person creating the general ledger should understand the industry and accounting concepts.
To operate a successful business, understanding your finances is key.
Understanding your finances will help you maximize profits, identify your break-even point, meet legal obligations, plan future growth, generate cash flow and manage your income. Use these five tips to get control of your finances and grow your landscaping business to another level.
EDITOR’S NOTE: Derek Dawson is the founder of Dawson Property Management in Charlotte, North Carolina. The company was started in 2011.