Proper financial management is essential for keeping your business afloat. Neglecting to acquire good financial management skills can lead to trouble securing financing, paying hefty penalties, and driving suboptimal business decisions that could bring down your business. Let’s look at some tips that can help you manage your startup or small business finances.
Pay Yourself
It is often easy to neglect paying yourself as a small business owner, especially if you are just starting out. Most people are often tempted to direct all the funds into their day-to-day operations.
Keep in mind that compensating yourself is one way of motivating yourself to keep pushing. Allocating a section of profits to your salary also helps you maintain individual financial stability.
Always maintain separate business and individual accounts and ensure they are both in good shape.
Be Wise With Loans
Don’t be afraid to take loans. You can get the much-needed capital to manage cash flow, expand the team, and upgrade equipment. If your savings and help from family and friends aren’t enough, securing express loans or other funding options can help keep your business on the road to success. The best business loans have favorable rates and terms that many small business owners can meet.
Maintain a Solid Business Credit
You need a good credit score to qualify for financing or loans from banks and lending institutions. A poor credit score can make it difficult for your business to get approved for acquisitions and transactions needed to promote growth.
Focus on building a solid business credit score to broaden your financing solutions and streamline future transactions. Make it a priority to clear debts in time and shy away from high-interest loans beyond your capacity to avoid trapping yourself in bad debts.
Keep an Eye On Your Books
Failing to monitor your books means you may not know your business’s financial position. Even if you engage the help of a financial professional or bookkeeper, regularly evaluating your financial records yourself can help you detect anomalies and pinpoint potential risks. While at it, spend time reviewing bank reconciliations and outstanding invoices to highlight wasteful spending or embezzlement, if any.
Establish a Proper Billing Strategy
Managing your small business finances efficiently also translates to managing cash flow to maintain healthy day-to-day business operations. As a business owner, you might encounter customers who have chronic late payments and invoices.
A huge amount of cash held in unpaid invoices can result in cash flow problems, which are the force behind the downfall of most businesses. If you are already having a difficult time collecting payments from chronic late-paying clients, consider getting creative with your billing to promote prompt payments and boost cash flow. You can provide incentives and bonuses for timely settlements or adjust your business terms to emphasize upfront payment.
Spread Out Tax Payments
If you are struggling to save for quarterly tax payments, consider adjusting them to monthly payments instead. This will help lighten your business’s financial burden as you will treat your tax deductions like other monthly business expenses.
Embrace best practices for tax planning to lower your IRS tax obligations and benefit from tax deductions, tax credits, and write-offs. Utilize cloud accounting software to streamline your tax planning and compliance.
These responsible financial habits will help you run your small business more efficiently, lowering risks. Always seek professional help and employ the right accounting and billing tools to stay on top of your finances.
