Building a Sound Financial Foundation for your Internet Business

Starting up a new business is exciting. You’ve got all these great ideas or products that you are going to sell and make lots of money with.

There’s websites to build, preparation for product launches, social networking and so on. In comparison to all these other activities, dealing with accounting and finance matters sounds about as appealing as a visit to a dentist.

Sound financial management practice is the business equivalent of a good dental health regime. Without it, decay will set in and there’ll be very unpleasant drilling and extraction work by the “dentist” in the form of the tax office, creditors, banks etc.

I have seen many young fast growing businesses falling over because they didn’t have sound financial management practices in place. Ironically, it is when rapid business growth happens that the financial cracks emerge.


Get an accountant

Unless you are an expert in accounting and tax, an accountant is one of the key advisors that your business must have on an on-going basis.

Choose a good reputable accountant. Not all accountants are created equal. I have come across some who not only charged like wounded bulls but also provided bad advice. Get recommendations from trusted sources if you don’t know who to go to.

Meet with your accountant before you even commence trading. At this meeting, find out about all the regulatory, tax and other compliance matters that apply to your business such as:

  • What are the federal, state and local taxes that apply to your business?
  • Do you have to add value added tax (VAT) or goods and services tax (GST) to your services or products? You need to allow for these in your pricing or you’ll end up eroding your profit margins!
  • When do you have to do filing of returns and payment of these taxes?
  • What kind of record keeping systems should you have for your business? Should you be accounting on a cash or accrual basis?
  • Do you have to contribute to pension (superannuation) funds?

Separate personal from business finances

Your business must be treated as a separate and distinct entity from you as an individual.

Open a separate bank account. Only business transactions go through that account. You can only take money out of the business as salary, loan or dividend or partnership drawing (depending on the legal structure). There are different accounting and tax implications for each.

Keep a separate credit card for your business. If your business does not qualify for its own business credit card, choose one of your own cards to use solely for business purposes. Credit cards can be fantastic cash flow management tools for small businesses IF they are properly used.

Why separate personal from business finances?

(a) administrative efficiencies (you don’t want to spend hours trawling through bank or credit card statements trying to identify what is personal and what is business) ; and

(b) clarity for business cash flow planning and management

Plan and manage cash flow

There’s an old saying: “Profit is Opinion. Cash is Fact.” Cash flow is the life blood of a business. Failure to understand and manage cash flow is the most common killer of businesses, large or small.

Cash flow planning and management must be done at  2 levels:

  • Strategic or “working ON the business” level; and
  • Day-to-day or “working IN the business” level

Even if you have a strategic plan with a full-blown 3-way financial forecasts, day-to-day cash flow management is still essential because cash flow is all about timing. You must ensure that there’s always enough money to pay bills when they are due. Do this with a simple tool that goes by the fancy technical name of “rolling weekly cash flow forecast”. You can set it up on a spreadsheet (recommended) or on a whiteboard.

What is a Rolling Weekly Cash Flow Forecast?

  • Detailed week-by-week forecast of expected cash receipts and payments, and the expected bank balance at the end of each week
  • Forecast period of 8 to 12 weeks out, and
  • Updated every week so you always have visibility into expected weekly cash flow for the coming 8 to 12 weeks (hence the name “rolling”)

Caution! If your business provides refund guarantees on its products, the money that you receive from these sales is NOT yours to use until the guarantee period is up. DO NOT USE THIS MONEY. Isolate it from your “available to use” funds. Either  physcially transfer the money into a separate at-call interest bearing account or as an adjustment to available bank balance in your forecast spreadsheet. Likewise with any VAT, GST or other taxes included in your collections: you have to pay these to the relevant authorities at some point.

Even if you outsource the actual grunt work of the finance and accounting function, you must understand the finances of your business to ensure it survives and thrives in the long term. Get advice or coaching to help you master this essential business skill.


Siu Ling Hui, the founder of In-Context Finance, is a successful financial consultant who helps to small and medium sized businesses (SMBs) with obtaining debt finance and equity funding to achieve their business objectives. She also assists business who are in financial trouble to get back on track. Her blog Ruminations by In-Context Finance provides practical business advice for SMBs.


  1. We did the last 2, but I wish we had gotten an accountant/book keeper much sooner then we did. I guess I didn’t think we could afford it, but our book keeper was about 100 a month. We could afford that even in the beginning! We just didn’t know it would be that cost effective, I guess…

    • Hey Sterling,

      A good accountant is an investment, not an expense, right?


      • I hadn’t thought of that before, but I like it!

      • Absolutely an investment! Invest wisely though – there are some who don’t quite do the right thing by the profession.

      • Totally! I would say it’s a two-fold investment.

        First, she can save you money on your taxes that more than repay the “expense” of her services.

        Second, the amount of time and energy that you save using an accountant are hugely valuable. You can take that saved time and energy and make more money, grow your business or do things that you enjoy — not too mention the reduction in stress.

        Those are all benefits that I’m happy to invest in.

  2. Thank you so much for this article. I have worked as an accountant assisting business owners for over 20 years. I cannot tell you how many times my clients would have saved my fee many times over if they had only consulted with me first!

    This article is a must-read for anyone starting a new business!