What if your business was digging its own grave every single day?
The goal of any small business is to make profits and expand. However, if that business cannot effectively manage its finances, then it will always be doomed to failure.
Fortunately, a few easy tips can help you manage finances for small businesses. Keep reading to discover the secret!
1. Don’t Forget Yourself
Our first tip is nice and simple: don’t forget to pay yourself!
When you first start a business, it can be tempting to put every single dollar into business growth. But this can backfire in several ways.
First, your own family may suffer if you’re not bringing money in. It’s no good for your business to grow if it tears your family apart.
Second, there’s always a chance your business could fail. It would be terrible if that happened and you never received any compensation.
Finally, failing to pay yourself means you’ll never learn a key lesson: how to separate finances.
2. Keep Them Separated
As a small business owner, it’s crucial for you to separate your personal and business finances. And there are several ways to make this easier.
For example, you can get separate credit cards. It’s easy enough to avoid personal expenses on a card clearly marked as your business credit card.
You should also open separate bank accounts. This makes sure that you aren’t borrowing from the wrong “pool” of money, and it also makes it easier to pay yourself.
And if you set your business up as either an LLC or S-Corp, separating your finances is a crucial way of protecting yourself in the event of your business failing.
3. Software Solutions
We have focused a lo so far on managing income. In order for you to manage that part of your finances, though, you must be able to accurately and quickly track income.
Some owners still do this “old school,” keeping stacks of invoices and checks and manually entering everything. However, there are many software solutions to make this easy.
For example, if you set up a Paypal Business account, you can easily send and track digital invoices with the click of a button. You can also use online versions of Excel and other software to track income from different streams and to examine any important patterns and fluctuations over time.
4. Billing Strategies
Any business owner can tell you this simple truth: there is a difference between sending an invoice and getting an invoice paid.
Some customers will be very late paying a standard invoice. And they may not respond well to typical requests and reminders that they need to pay.
For these customers, you may need to develop some strategies. For example, you may set up an incentive program that knocks 2-3% off of their total due if they pay within 10 days of the invoice. Otherwise, they will owe the full amount.
Creative incentives like this are a good way to get invoices paid in a more timely manner!
5. Cut Down on Costs
The bottom line for any small business is making a profit. And in addition to boosting income, profit is all about cutting office expenses.
One of the best ways to do this is to find free alternatives to costly programs. There are free, cloud-based alternatives to most major programs that your business can use. And when you multiply software savings across every computer in your office, that really adds up.
You can also embrace free video calls instead of costly travel arrangements. And for any service you do pay for, don’t be afraid to negotiate for a better rate.
6. Tracking Expenses
You can use the same software for tracking expenses as you use for tracking income. And keeping track of your expenses is an important step to effectively manage finances.
Many of your best business tax deductions are tied to your specific expenses. But if you don’t keep accurate track of those expenses, you won’t be able to take the deductions (or prove they are accurate if you end up getting audited).
And monitoring your expenses is a great way to find out more about how to cut costs. Once you can see all of the business expenses at a glance, it’s easy to find where you’re spending too much money.
7. Tax Payment Tips
Speaking of taxes, one of the worst things about owning a business is making quarterly tax payments. If you are used to paying taxes only once a year, this can really throw you off!
If you hate paying quarterly taxes, we have a simple recommendation: make it a monthly payment instead.
Your accountant can help calculate what you owe as a monthly payment instead of a quarterly payment. This makes it a regular expense to anticipate instead of a quarterly expense that takes you by surprise.
It’s easy to think of “analytics” as just another buzzword. However, analytics is the key to helping your small business grow into something larger.
For your website, simple tools like Google Analytics can help you to monitor digital traffic. This includes the number of website visitors, how long they stay on each page, and which keywords brought them to your site.
Even for a local business, long-term success means success on the global stage. You may have potential customers halfway across the world, and your website is the best possible way to reach them.
Analytics gives you the chance to update your website, products, and marketing to cater to customer needs and desires. And in this way, analytics is actually the cornerstone of your finances: by improving your product and marketing, you can improve your profits and overall financial stability!
Managing Finances for Small Businesses: The Bottom Line
Now you know more about effectively managing finances for small businesses. But do you know how else you can make managing the business much easier?
Here at Small Business Brief, we provide the tips and tools you need to help your small business. To see how we can help your business grow, check out our free templates and forms today!