13 Tips for Managing Your Small Business Finances

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13 Tips for Managing Your Small Business Finances

According to one report, 77% of Americans are worried about the state of their finances. This includes small business owners, who have to juggle the demands of an ever-fluctuating consumer economy with tightening restrictions on their budgets and operations. 

While business finances may always be in a state of flux, there are steps you can take to optimize your bottom line. Today, we’re sharing 13 effective moves that can help you regain your financial footing and make strides toward long-term, sustainable success. 

1. Take Control of Accounting

Effective financial management requires a deep understanding of your company’s accounting processes. Whether you choose to maintain that activity manually and in-house, outsource it to a third party, or allow software to do the work for you, it’s critical to know where you stand. 

Without a clear view of your daily, monthly, and annual revenue and costs, it can be difficult to make any sort of operational decision. Start by establishing clear parameters around this function before moving on to the rest. 

2. Consider the Cloud

To conserve resources, save time, and reduce the risk of human error, consider moving all or a portion of your accounting activities to the cloud. Accounting software that utilizes the cloud enables team members to keep a real-time eye on all financial data. 

With a few clicks, anyone with authorized access can track, update, share, and manage insights from anywhere, at any time. This improves visibility into this department and makes it more agile.

3. Conduct Regular Cost Checks

It’s all too easy for a business to lose track of its spending. Certain investments might seem like essentials when they are anything but necessary. Then, there are some costs that are absolutely mission-critical. 

While you may not be able to crunch the numbers every day, aim to schedule regular cost review meetings. At this time, accounting team members can share the latest business expenses and compare them against short-term and long-term budgetary restrictions. 

4. Remember to Pay Yourself

Especially if you’re at the helm of a fledgling startup, you might be tempted to pour every cent of your earnings back into the company. In theory, that money can help you get operations off the ground, attract new partners, and appeal to your target customers.

However, it’s important to make sure that you don’t drain your personal finances to keep your business ones afloat. Consider what would happen if the business didn’t work out and you didn’t have any savings of your own?

While you’re setting up payroll, include yourself and make sure the compensation is adequate. Doing so could relieve a ton of financial strain both today and down the road. 

5. Create an Efficient Invoicing Process

You don’t get paid until customers complete their invoices. To that end, develop an efficient process for creating, submitting, and receiving them.

Aim to issue invoices as soon as you provide a product or service. In addition, set up clear payment terms and conditions, and make sure all of your buyers clearly understand them. In most cases, a seven-day timeline is ideal and can help ensure that payments aren’t lost or forgotten. 

You can also create templates for invoice follow-ups, making the process as quick and easy as possible. By sending these reminders via email or SMS, you can engage your outstanding accounts and encourage prompt payment.  

6. Set Aside Money for Growth

As you run your business, you might not feel comfortable thinking too far ahead. Yet, focusing solely on the day-to-day operations doesn’t leave much opportunity for growth.

If you want to scale your business, then it’s essential to make sure you have enough capital set aside to do so. By keeping a future-focused perspective, you can set yourself, your company, and your team members up for success. 

This includes saving money specifically to invest in new tools, systems, and software that can drive your business forward. One example is enterprise resource management, or ERP.

While leading ERP platforms like Acumatica might be costly at the onset, they can deliver valuable savings, streamline operations, and improve team member performance. As you research available solutions, make sure you understand the investment required for each one. Ask your financial team questions like, “How much does Acumatica cost?” and make sure you understand how each pricing model operates. 

7. Consider Loans as Appropriate

A common misconception is that a bank loan will always work against your company finances. You might grimace at the thought of amassing one more bill to pay each month.

However, business loans can be a valuable resource to many enterprises. With the additional capital they provide, you can secure a variety of resources, from new equipment to top-tier talent. You can also use a business loan to pay suppliers, improve your cash flow, and explore new market opportunities. 

While you never want to accept loan terms that are beyond your capacity, don’t shun the idea of them without carefully considering how they can help.

8. Invest in a Business Credit Card

While we do recommend paying yourself, it’s equally important to keep your business finances separate from your personal ones. Mixing the two can be both complicated and messy, as well as high-risk.

To this end, go ahead and get a business credit card to cover all of your company-related expenses. Not only does this make it easier to track where and how you’re spending money, but you could uncover additional perks. Many companies will provide special rewards for users who rely on their cards to make business purchases. 

9. Keep a Solid Business Credit Score

You might know your personal credit score by now, but do you know how your business measures up? If your business credit score is low, then it could negatively impact your ability to expand and perform in the future. 

For instance, the following transactions all require approval by a financial institution:

  • Purchasing commercial real estate
  • Taking out a business loan
  • Buying business-specific insurance policies

If your number is less than stellar, then the good news is that there are steps that you can take to improve it. Primarily, you’ll need to take inventory of all of your debt funding and make sure you’re focused on paying it down as soon as possible. 

Don’t keep long-running balances on your business credit cards, make sure you can afford the interest rate of every loan you take out, and only accept funding that you know you can comfortably pay back. 

10. Prioritize Frugality

Even if your business takes off and your small business finances are good, remember that it could all turn on a time. That’s why it’s important to stay frugal.

Make sure you truly need a new tool or technology before investing just because your peers are doing it. Carefully calculate the costs involved in your marketing campaigns, supply chain lines, benefits distribution, and more. Look for ways to reduce spending without sacrificing quality, customer satisfaction, or employee morale. 

Saving where you can now could free you up to make larger purchases in the future. Likewise, it can serve as your backbone if you fall on leaner times and need to conserve.

11. Strategically Structure Tax Payments

Some small businesses might find it difficult to save enough money to comfortably cover their quarterly estimated tax payments. If this is the case, then talk to your tax accountant about paying monthly, instead. 

When you treat your taxes this way, you can add them into your other monthly operating expenses. This can make them easier to track, plan, and manage. 

12. Minimize Travel Costs

Yes, your team members may need to travel at times. However, these costs can quickly add up. That’s especially the case if they’re staying in luxurious hotels and eating at fine dining establishments all the time. 

Remember that these expenses don’t deliver much return to your company. Where possible, look for ways you can conserve money as you travel. While you want the accommodations to be safe and sanitary, you don’t have to book the Ritz every night. 

13. Set Regular Forecast Meetings

As a business owner, it’s critical for you to look five or even 10 years down the road at all times. This includes making decisions with that same mindset. 

If you aren’t sure where your finances will be in the future, you could make ill-informed investments that could derail your long-term stability. This is why it’s so important to hold regular forecasting meetings.

Your accounting team can use software to generate reports that depict your current and projected status. You can also identify trends, patterns, and areas of improvement. These future-focused conversations can help you understand where you need to take action today to ensure profits are stable tomorrow. 

Optimize Your Business Finances One Step at a Time

Business leaders often carry the weight of the world on their shoulders. In addition to making sure your employees are happy and your clients are satisfied, you also have to monitor your company’s financial health.

The steps above can help you take control of your business finances. As you make smart investments and look for places to save, remember to keep your long-term goals top of mind.

In the meantime, we’ll keep you covered with all the latest business and tech news you need. Check back often for more insightful guides!