Managing small business finances can be a challenge for every busy business owner. Your business’ success depends on your unique skills to make products or provide a service, but small business owners are typically not also accountants or bookkeepers. If you don’t have a ton of experience managing your finances, it can feel more like an overwhelming chore than a simple part of business management.
Here are tips for managing your business finances.
Pay Yourself a Salary
When running a small business, you might want to put everything you make back into the business since extra money can go a long way in promoting growth. However, small business owners shouldn’t overlook their salary and role in the business. Compensating yourself ensures you have strong financial health and can pay off your personal bills while still managing the business. It’s no use having great business financials if your personal finances are a mess and you’re worried about losing your house.
Remember, if the business doesn’t work out and you haven’t paid yourself, then you’ve made exactly zero money, which can impact your entire life. As such, you should accordingly compensate yourself.
Invest in Employees
Employees can either help you save money or lose money. A great employee who is productive can help your business grow, but a lazy employee could be a waste of time and money. It’s important that you not only hire good employees but invest in them with employee retention strategies that can help keep the employees that save your business money around longer.
Focus on Growth
If possible, you should always have money set aside that can help promote growth. Small businesses that want to grow need to demonstrate they are willing to invest in the future. While spending money on things to ensure your business has a future can seem stressful when you’re not off the ground yet, thinking ahead and investing in your potential to grow can help you achieve growth easier.
For example, an increased level of customer service can increase overall satisfaction, which means better online reviews and ultimately more customers. Of course, you have to invest in the workforce to increase customer service initiatives.
Not only that but investing in growth can help you attract and retain top talent that’s looking for ways to boost their careers and be happy at their jobs.
Take Out a Loan
Many businesses need loans to use for paying employees, marketing their products, and even product development. There’s no shame in taking out a loan, even though it can seem scary. While loans can have financial consequences if your business fails, an influx of capital may also prevent your business from failing while allowing you to grow your team. You can also use the loan to increase cash flow to pay suppliers on time.
Do Your Bookkeeping
There’s no point in having a business bank account if you’re not going to look at it; instead of simply checking your balance, run reports to understand where your money goes and how much. Doing your bookkeeping can help you find ways to maximize your budget while reducing spending.
Check Your Credit
When businesses grow, they might need to purchase real estate, acquire insurance policies, and take out even more loans to support their growth. Having poor credit means you might not get approved for the transactions your business depends on. Instead, you should keep your business credit in good standing by paying off your debt quickly and on time. For example, if you have a loan, you should always make at least the minimum payments each month. Additionally, you should always and completely pay off your business credit cards.
Consider Your Billing
Managing your finances should always include ensuring you get paid. While every business has a client that pays a little late every now and then, having a good billing strategy in place can prevent all of your clients from paying late.
Having too much money tied up in invoices can mean you can’t pay your employees or order new products. If you have a client or partner that always pays late, sending them an invoice and calling them often might not be enough. Instead, you might need to change the payment terms.
For example, you can give the late-paying client a discount for paying within two weeks of your invoice being sent. While this means you may have to give up some of your revenue, it will ensure you can still make the necessary purchases and pay your employees to keep your business running. Not only that, but the percentage doesn’t have to be large; something as little as 2% might perfectly work.
Do Your Taxes
As a small business owner, you’ll owe taxes every quarter. Unfortunately, many small businesses can’t always afford to pay their taxes because they put their earnings back into the business. If you find out you can’t pay your quarterly taxes, then consider making it a monthly payment instead. Paying your taxes monthly can make you think about it as a monthly expense instead of a quarterly expense, which can be difficult to save for.
Have Good Habits
Every business needs protocols that invoice spending money. You should always have one person in your organization in charge of purchasing to ensure you’re not going over budget. If your employees need something purchased, there should be an approval process in place. Another good habit is to set aside time to check on your finances and ensure your business is operating smoothly on the financial side. You should set aside time at least once a month to review your bookkeeping and bank accounts.
Planning for Better Business Finances
If you’re spending money and can’t seem to figure out where it all goes, then you’re probably not properly planning. Planning allows you to foresee costs you should expect to incur as a business owner. For example, if you know you have quarterly taxes coming up, you should start setting aside money now to pay for them. Not only that, but you should be aware of when invoices are due and when your billing needs to take place.
Matt Casadona
Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. Matt is passionate about marketing and business strategy and enjoys San Diego life, traveling, and music.
Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. Matt is passionate about marketing and business strategy and enjoys San Diego life, traveling, and music.
Resources
https://en.wikipedia.org/wiki/Organic_growth
https://www.wikihow.com/Measure-Company-Growth
