Best ways to manage your small business’ finances
When you own and run a small business, especially if it’s a newborn start-up business, it’s easy to fall into one of two financial zones: too comfortable or completely overwhelmed.
In business, you need to have a handle on your finances and save yourself from fraud, debt, bankruptcy or any sticky financial situation.
It won’t look good on your business record and it won’t instil confidence on behalf of your customers.
We’ll be looking at the best ways you can manage your small business’ finances to keep the business financially healthy and help it grow in its success.
Know what you’re doing or hire someone who does
The financial department is not one to skimp on. This means either you need to take the necessary courses to know exactly what you’re doing or hire somebody who’s already qualified for the job.
In most small business cases, it’s always better to have a financial advisor take care of your business finances as it requires slightly more responsibility and accountability than if you didn’t need to report to someone about where your business expenses go. It will also free up precious management time that can be better spent on the company’s day-to-day operations than stressing out over mundane bookkeeping and financial tasks.
And if you can’t trust an outside person to help your business, there’s always the option of using trusted accounting software to help you out.
Don’t cheat the business budget
Budgets are incredibly important for businesses. In your business budget, you will keep track of every cent coming in and out of the company as well as any debts that need to be repaid and expenses that need to be monitored. And you need to stick to your budget. Otherwise, you’ll be on a fast track to debt or audits.
Knowing how much money is coming in will allow you to easily plan for the future when business is doing well. The best way to redirect “extra” profits, is to pay off any loans you have outstanding for the business. Loan and repayment calculators make it easy for you to work out how much quicker it will take for you to pay off your loan should you increase your monthly installments with the extra cash. And if you ever need to take out another loan, which should not be done without consulting your financial advisor and budget, an asset finance calculator will tell you how much you’ll end up paying for the loan as a whole.
These figures are important to know as interest rates lead you to spend more money on a loan than you budgeted for. And that’s the type of detail that should be included in your business budget. You need to keep track of all the money in your company, no matter how small. It’s only going to become a larger, more intricate task as your business grows. So, do your business a favour and practice good budgeting skills from day one.
Separate your personal and business finances
You may be the boss and you may have money invested in the business, but you need to keep your business and personal finances separate if you want to succeed. It will be easier to track expenses from separate accounts and you’ll be saving yourself from tax nightmares by keeping the two apart.
The business should have its own account, card and savings account from which all business-related expenses and incomes go through. Having one account for business and personal isn’t the simpler choice. Any business owner can tell you that.
Save money on business processes where you can
A great way to manage your finances and expenses in your business is to limit your expenses as much as possible.
There is a lot of free and affordable business software that can help you efficiently run departments and business processes in your company. And they do it without the need to hire third-party companies or more staff to do the job that you can’t fit in the business budget right now.
Marketing, payroll, accounting, organisation, project management and data storage are only a few examples of business processes that can be operated by software programs. All that extra effort and stress can be lifted off your shoulders and downloaded onto these systems that will do the grunt work for you.
It pays to be frugal in a small business. Make use of Skype instead of travelling across the city to meet with clients over minor details. Don’t send your entire team across the country to conduct business that can easily be done by one person. Negotiate with suppliers and vendors when it comes to signing contracts. Rent your office space for the time being and opt for secondhand furniture and equipment (that still works, obviously).
Manage your small business’ finance for the best interests of the business if you want to watch it thrive.