Running a small business isn’t easy; there are a lot of factors to consider, and many different things need your attention. One of the most challenging aspects of running a small business is money management. You need to keep on top of your finances to ensure that the money doesn’t stop flowing; read on to find out more.
Managing Your Money Day-to-Day
The key to looking after your finances is simple, for the most part, you need to keep track of your incomings and outgoings. If you aren’t comfortable with it or you lack the know-how to keep an accurate account, then you should look for an accountant or bookkeeper. In keeping track of your expenses, you also have the opportunity to review them and swap them out for cheaper alternatives where possible to save money. Think about investing in software that can make your life easier; for example, Payhawk provides a number of services designed to help you take care of your business finances from expense management to reimbursement, not to mention their resources on the best practices from the world of fintech.
Finally, you need to stay on top of your invoicing. Clearly define your payment terms in advance and make sure that you send out your invoices as soon as you can after you have provided your goods or services. Make following up a part of your financial process. You can set up automatic emails or SMS messages to be sent out after a predetermined period to your consumers. Set up your invoices with reference numbers which you or your account can then cross-reference with the payments received.
Keep Your Business Finances Separate
You need to have a separate business bank account; you should never mix your business finances with your personal finances – it is a recipe for disaster. Keeping your accounts separate makes it easier for you to gauge your profitability and the viability of your business practices. You should also always pay yourself; first, this does not mean that you siphon all of your business’s profits as soon as they hit your business account; instead, you should be strict, come up with a sustainable percentage and stick to it.
When you are paying yourself, it is easy to get carried away. If you want your business to succeed, you should reconsider your salary. The more money that you give yourself, the less you leave for business expenses. You need to retain as much profit as possible just in case you are hit with unexpected bills. Finally, in addition to keeping your business finances separate from your personal ones, you should do the same with your time as a whole. Taking time for yourself outside of work is paramount, otherwise, you risk burnout which can jeopardise your business.
Don’t Lose Sight of the Bigger Picture
As the owner of a business, you are on the hook for the legal status of that business, which means acquiring and paying for any licenses that you need and keeping track of your taxes too. Expansion is an incredibly common goal for a lot of business owners. If it is one of yours, then you need to plan for it. Expanding costs money, and if done incorrectly, the costs can snowball and tank your potential profits. What are the other overall goals of your business? Think about how your finances will affect those.
Think about areas where you could cut costs. One way that you can save some money is by taking control of your PR and marketing. There are several strategies that you can employ. There are a lot of different forms of marketing that can be carried out in-house; take social media marketing as an example; it can be done cheaply or at no extra expense. You could also save money by choosing to rent or lease equipment instead of buying it. This also means that you aren’t saddled with a piece of expensive equipment for any longer than you need it.
Lastly, have you checked your eligibility for any government grants or schemes which are designed to help small businesses? Do your research to check whether or not you qualify and what is required of you to ensure that your application is successful. These schemes don’t always mean that you will get given some money; it may also be tax breaks which is just as good as money in your pocket.
Your financial competency has a significant effect on your business and your success. If you are not savvy in money management, then you are not giving your business the best chance to succeed. However, learning to look after your finances doesn’t have to be difficult; take on bored the above three tips to help you to devise your financial strategies.