15 Tips to Manage Your Small Business Finance
If you’re the owner of a small business, overseeing the day to day operations and making sure everything is running in the right direction can be difficult. Unlike the large giants who may have a dedicated team working on the financial side of things, it may be left up to you to keep track of your business finances.
When launching a new business, not only are you responsible for saving up sufficient capital to cover all your expenses, you will also need to find proper startup funding before you can expect to make a profit. Taking your time to prepare for your business finances will help make sure you’re in control of where every last penny is going. With that in mind, here are some useful tips to take on board to help you stay in control.
Before you take the plunge into the business world, it’s crucial that you’re equipped with the knowledge and skills you need to properly manage your small business finances. For example, you can look for additional training on sites like findcourses.com. Findcourses.com lists finance courses that can give you a solid grasp of financial management, helping you to make better decisions. You can visit where you can find a range of courses such as how to budget and manage money, how to develop your financial plan, as well as how to understand financial reports.
Manage Your Accounting
Once you’ve gained relevant credentials, it’s crucial that you know how to properly manage your accounting. While you can hire a bookkeeper to keep on top of things, there is the option to buy DIY accounting software too. As a small business owner, you may not have the budget to bring others into your operation, so getting to grips with accounting software will mean you can keep accurate track of your business income and costs.
Review Your Costs
Knowing where every penny is going in your business is important, so make sure that you stay on top of all your expenses. Whether you run a company solo or employ others in your business, costs can add up quickly before you know it, so taking some time to review them will enable you to fine-tune where your cash is being spent. Keeping track of your costs will give you the opportunity to make changes if need be.
Make Financial Projections
For your small business to run in the right direction, it’s important that you lay out clear financial projections from the get-go. To do this effectively, you will need to draw up a business plan that can help you anticipate and sort out any possible future obstacles. As a small business owner, you need to be organized, so having a business plan in place will help you identify any risks that could cause problems in your day to day operation.
Consider Using Apps
Thanks to technology, more and more business owners are turning towards the internet and using specialist apps to help them keep track of what is going on with their expenses. Whether you are tech-savvy or not, there are tons of mobile apps on the market that are designed to help small businesses with their finances. What’s more, many of the apps are free to download and have tutorials to take you through the process.
Keep Control of Invoices
Many small business owners make the mistake of falling behind on invoicing, which can have disastrous consequences later down the line. It’s important that you send out invoices as quickly as possible once you’ve provided goods or services. Make sure that you set your payment terms at seven days to ensure payments aren’t lost or forgotten. You should also always follow up on sent invoices. To make things easier, you can create a set template for SMS or email follow-ups.
Create a Separate Business Bank Account
The last thing you should do is mix business money with your personal finances. No one wants to deal with tax-headaches and unexplained losses, so keeping your company’s money aside will make gauging profitability easier, as well as help you stay in control of your expenses.
Pay Yourself First
While it’s important that you pay yourself first, this does not mean that you should suck up all the profit from the moment you make it. Instead, it’s advised to begin with 10% of the earnings you make. Doing so is a great way to set cash aside consistently, giving you the means to assess the profitability of your company. You will also have a safety net should you run into any unexpected expenses.
Even though you are in charge of paying yourself, make sure not to get caught up in the benefits that business ownership can bring, even if you’re able to afford it. Remaining frugal and setting your salary as low as can be will give you money that you can set aside should you need it.
Keep Traveling Costs Down
When factoring in hotel and travel costs, you should see them as a place to simply lay your head, giving you a base to get from meeting to meeting. Rather than splashing the cash on luxurious accommodation, it’s best to be savvy with your money instead. Even as the owner of the business, you should plan your trips as though you’re paying for them yourself.
Take Some Time for Yourself
If you’ve just launched your own business, it’s only natural that you will want to put your full concentration and focus into making it a success. While it may be tempting to catch up with finances in your spare time, it’s important that you take a break from managing things properly, otherwise, you could end up making mistakes which could prove costly in the long run.
Understand Legal Fees
Legal services are known for being notoriously expensive, so it’s vital that you figure out a way to best manage these costs. There are various tips that you can take on board, such as making your expectations clear to your lawyer, choosing a billing option that is cost-effective for your company, as well as asking whether you can defer payment until a project is funded.
Take Out a Business Loan
Another easy mistake that many small business owners make is waiting until your company is in financial hardship before applying for a loan or other credit. If you do this, it’s likely that you won’t receive the financing you need, so it’s advised to apply for a business loan when your financials are still healthy and in a good state. If you run into any problems, you will want to make sure that you have the funds behind you to stay afloat, so taking out a loan can act as an emergency backup.
Check Your Business Credit Score
If you’re struggling to get good credit deals, it could be because you have a poor business credit score. Your credit score is vital to the financial health of your company and can have a big impact on your business in various ways, such as the amount of credit suppliers will provide you, as well as the interest rates that you will pay.
Don’t Make Late Repayments
From the moment you launch a small business, showing that you’re a reputable and reliable company is paramount. The last thing you should do is make late repayments, as not only can it turn out more costly than anticipated, you will set a bad tone to customers, suppliers, and stakeholders.
No matter what field of business you’re in, getting a good grasp of financial management from the beginning is key. To help manage your small business finances, all the tips above can ensure you stay on track and have the funds needed to keep your company thriving.
Photo by Andrey Popov | Shutterstock
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