Small businesses often succeed because of their expertise in manufacturing products and providing services. Unfortunately, you may not be an expert in other important parts of running a business, such as financial management. It can be difficult if you don't have much experience managing your business' finances, but it's also important to the survival of your business. Learn how to establish responsible financial habits that will help your business succeed.
Small business financial management tips
Here are some things small business owners should do to stay on top of their finances.
1. Pay for it yourself.
If you run a small to medium-sized business (SMB), it can be tempting to put everything into your day-to-day operations. After all, that additional capital often goes a long way toward growing your business. Alexander Rowley, professor and director of the Master of Science in Financial Analysis program at Gordon College, said small business owners should not overlook their role within their companies and should be compensated accordingly. . You want to make sure your business and personal finances are in good shape.
“Many small business owners neglect to pay themselves, especially at first,” he says. “They are [believe] It's more important to get your business up and running and paying other people. But you can't pay yourself if the business doesn't work out. Remember that you are part of the business too and need to reward yourself as much as you pay others. ”
2. Invest in growth.
It is important to secure funding and consider growth opportunities. By doing so, you can grow your business and move in a financially healthy direction. Edgar Corrado, chief operating officer at Tobias Financial Advisors, said business owners should always look to the future.
“Small businesses that want to continue to grow, innovate, and attract talented employees. [should] It shows they are willing to invest in the future,” he said. “Customers will appreciate improved service levels. Employees will appreciate that you're investing in the company and their careers. And in the end, you'll want to keep all the profits personal.” You'll create more value for your business than you would spend on it.”
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3. Don't be afraid of loans.
With financing, business owners may worry about the financial consequences of failure. However, without an influx of capital through financing, you could face major challenges when purchasing equipment or growing your team. Loan proceeds can also be used to increase cash flow, reducing the problem of paying employees and suppliers on time. Additionally, the best business loans come with terms and interest rates that many small business owners can easily afford.
4. Maintain good business credit.
As our company grows, we may need to purchase more commercial real estate, obtain additional insurance policies, or take out more loans to facilitate these pursuits. If a company has poor creditworthiness, it may be more difficult to obtain approval for these transactions or acquisitions.
To maintain good credit, pay off all debt as soon as possible. For example, don't let your business credit card carry a balance for more than a few weeks. Similarly, don't take out a loan at an interest rate you can't afford. Only ask for funds that can be quickly and easily repaid.
5. Develop a proper billing strategy.
Every business owner has clients who are constantly late on their invoices and payments. Managing your small business's finances also means managing your cash flow to ensure your business is operating at a healthy level on a daily basis. If you're having trouble collecting from certain customers or clients, it may be time to get creative with how you bill them.
“Large amounts of cash locked up in unpaid invoices can create cash flow problems and be a major cause of business failure,” says James, Editor-in-Chief of Invoice Factoring Guide. Steflak said. “If you have a customer who is chronically late on their payments, instead of nagging them with an invoice or phone call, try a different approach. Set your payment terms to 2/10 Net 30”. This means that if a customer pays his invoice within 10 days, he will receive a 2% discount from the total invoice amount. If not, the terms require him to pay the full amount within 30 days. ” [Read related article: What to Do When Customers Won’t Pay Their Bill]
6. Spread out tax payments.
Michele Etzel, owner of Bayside Accounting Services, said if you're having trouble saving for quarterly estimated tax payments, you should make monthly payments instead. That way, you can treat your tax payments like any other monthly operating expense. You can also streamline your tax payments with the best online tax software platforms.
7. Monitor your books.
This may seem obvious, but it is very important. Even if you're working with a bookkeeper, do your best to set aside time to review and monitor your books on a daily or monthly basis. This will give you a deeper look into your business' finances and provide clues to potential financial crimes.
“Don't ignore bank reconciliations and spend some time each month reviewing your outstanding bills,” said Terrence Channon, principal at NewLead LLC. “Failure to do so can leave your business open to wasteful spending and embezzlement, especially when bookkeepers are involved.”
8. Focus on both spend and ROI.
Measuring your spending and return on investment (ROI) will give you a clear picture of which investments make sense and which aren't worth continuing. Deborah Sweeney, CEO of MyCorporation, said small business owners should be careful about how they spend their money.
“Focus on the ROI associated with each spend,” she said. “If you don't do this, you could lose money on irrelevant or inappropriate spending bets. Be aware of where you're spending your hard-earned money and how that investment is paying off. Figure it out. If it's not paying off, cut back and spend more time on initiatives that will help you and your business.”
9. Develop good financial habits.
Establishing internal financial protocols, even something as simple as dedicating some time to reviewing and updating financial information, can go a long way in protecting the financial health of your business. Staying on top of your finances can help reduce fraud and risk.
“As small and medium-sized businesses, we are often pressed for time, money, and significantly less technologically capable, but this does not prevent small business owners from implementing some internal controls,” Corrado says. he said. “This is especially important if you have employees. Weak internal controls can lead to employee fraud and theft, and legal issues if you or your employees don't comply with certain laws.” You could get caught up in it.”
10. Plan ahead.
There are always business issues that need to be addressed today, but when it comes to finances, you need to plan for the future. “If you're not looking five to 10 years ahead, you're going to fall behind the competition,” says Tina Gosnold, founder of QuickBooks specialist Set Free Bookkeeping.
Tips for managing small business finances include paying salaries from company profits, planning ahead, paying off debt in a timely manner, and focusing on return on investment .
