Taking your dream of being an entrepreneur and putting it in action is an exciting time in your life. But just because you are excellent at your craft does not mean you are automatically a savvy small business owner when it comes to finances.
Most small business owners rate managing their finances as one of the top stresses they have to deal with.
Your business maybe booming because of the amazing service you provide, but if you don’t manage your finances well, you could be hurting yourself and your business.
Here are 8 basic, important tips for small business owners to help them stay on top of their finances.
8 Strategies to Manage Your Finances in a Small Business
1. Get Educated
Even with the highest college degree, if you do not have a grasp of simple accounting, an understanding of your bank financial statements, and other skills needed to run a business, your finances may get the best of you.
Taking the time to educate yourself or to learn from others who are skilled in this area can help you to create a stable business plan and a successful financial future for your company.
2. Give Yourself a Paycheck
This may be hard to do when funds are lean and you want to put all of your money into keeping your business going.
However, you need to keep your personal finances in shape as well. This is important when you file taxes, too.
Don’t wait until the last minute to begin cutting yourself a check, and speak with your accountant to determine the proper deductions.
3. Don’t Be Afraid to Ask for a Small Business Loan
Sometimes your business will have lots of potential but little capital, especially if you have outstanding invoices that you are waiting on for payment. But your employees and your bills still have to be paid.
Taking out a short loan to cover you is not a bad thing. Taking out too much and being unable to pay it back, or having impossibly high-interest payments, is not a smart business move, though.
Instead, many businesses have been turning to invoice financing as a way to make it through the slow months. Spot invoice finance is when you sell your outstanding invoices to a third party at a discounted rate.
They consider this an asset and provide you immediate cash in return for the promised invoice payment. Now, instead of having a loan you have to repay every month, you have the cash for your bills and no need to worry about the money you “borrowed” in the future.
4. Take the Time to Invest in Growing Your Business
In the beginning,you may only be able to afford basic equipment or minimal staff. However, as your business begins to grow, you may need to invest in better computers,increased staff, or even training for the staff that you currently have.
Investing in your future means improving your business’s values and overall bottom line. To effectively manage your business,you need to start learning how to grow your business by being a savvy small business owner.
5. Keep Track of Your Finances
Even if you have an accountant or a bookkeeper, stay on top of your books at least monthly. This is simply a smart business move. Reconciling your bank statements and checking on your receivables helps you keep a pulse on the finances and also deters the potential for embezzlement.
6. Keep on Top of Tax Changes
Every year there are changes to the tax laws. Not all of them apply to you, but you should work with your accountant to understand the ones that do and how they will affect you, your business, and your employees.
Don’t forget the importance of making your tax payments on time, either. If you find that it’s difficult to pay quarterly taxes, you may choose to pay monthly instead to keep them more reasonable.
7. Research and Model Good Financial Decisions
When you take the time to set a strong foundation for establishing good habits for your finances,it helps your financial stability overall.
Set up a monthly time to review your budget, your receivables, and your expenses. Analyze your customers’ invoices and determine if your billing strategy is keeping up or if it needs to be adjusted.
Don’t forget to also check on your technology. It becomes easy to assume that the computer programs you are using are taking care of your fraud protection and are up-to-date on the financial laws and security, but because of how quickly laws and policies regulating financial data change, these programs can become obsolete fast.
One security breach of a customer’s financial data can mean the end of your business.
8. Keep Your Eye on the Future
While it’s important to manage your expenses reasonably, you should also consider which expenses may bring you a greater return on your investment and which need to be cut back.
Always keep goals in mind for the near future, five years, and ten years ahead, and continually revisit your goals and the progress you are making towards them. You do not want your business to stagnate.
Even if you have a small business niche that has minimal competition that could change quickly,keep an eye on how consumers are changing the ways they purchase things.
The reasons why they are coming to you, and your ongoing marketing strategies and volume is because they believe you have an eye for the future.
If you are always looking at the near future,you may get hit head-on with things that were on the horizon and you didn’t see coming.
Plus… Have a Contingency Fund
A contingency fund is cash or other assets reserved to address unforeseen circumstances or losses in a business. No better way to manage one’s finances than planning for the future.
The role of the contingency fund is to improve a company’s financial stability by developing a safety net that the firm can use to fill emergency needs.
Finances are Crucial to Savvy Small Business Owners
It’s not good enough to say that you are just not a money person and hand the work off to someone who is in business to be one. You are ultimately responsible for your own money, and giving that full responsibility to someone else is financial negligence.
Instead, use these 8 tips to get control of your finances and create a solid future for yourself and your business. You worked hard to make your dream of being an entrepreneur come true – now take care of that investment!