Finance is about managing your money — knowing what’s coming in and going out. Check out our jargon-buster: B is for budget, C is for cash flow.
By understanding your business finances, you can make smart decisions about where to spend your money and make sure you’re earning enough to keep your business running.
A big part of managing your finances is having visibility of what’s going on in your business, whether you’re a sole trader, or in a partnership or company. The key tools and reports to manage your finances are:
Your cash flow is the money coming in and going out of your business — and how much of the money sitting in your bank account is yours to spend. A healthy cash flow is having enough money to pay what you owe when it’s due.
A budget is an estimate of your income and spending over a period. It helps you think ahead and plan your spending to get to where you want to go.
Your profit and loss statement is an accounting report that shows your income and expenses — and whether you made a profit or loss — over the financial year. It may also be known as the income statement.
The balance sheet is an accounting report that shows what you own and what you owe at the time of the report. It’s known as the ‘snapshot’ of your business’s financial position.
For tips and advice on managing your finances as a contractor, check out the Managing your contracting finances page on this website.
By staying on top of your finances you can:
Avoid these common mistakes to keep your business finances on track:
We want to understand the major challenges small businesses are facing, so that we can work with government and the private sector to help Kiwi businesses succeed.