Financial management is one of the more challenging components of small business ownership. For many entrepreneurs, starting a business in their area of expertise is a smart decision. Unfortunately, that area of expertise isn’t always managing finances, which is unavoidable if you want to be successful.
You don’t need to be a finance expert to put smart money management systems in place. Here are some helpful tips to assist you in starting to manage your small business finances.
Monitor and Repair Your Credit
To support your business’s financial health, you should always be aware of your credit score. Schedule time monthly to take a look at your credit score so that there are no surprises should you ever require a business loan. While you may be financially stable now, loans are sometimes necessary to support scaling and growth in the future.
Sometimes negative items on your credit go undetected and cause a lot of damage. By monitoring your credit score and working with a credit repair business as needed, you’ll be ready to move forward when an opportunity arises.
Budget, Forecast, and Track
When it comes to small business money management, get back to basics. Budgeting, tracking expenses, and forecasting are some foundational protocols you should be following to ensure continued financial health for your business.
Set a budget that makes sense and track where your money goes. For many small businesses, it’s the little charges that add up and do the most damage over time. Forecast your sales and scale your budget accordingly. This is an especially useful practice for seasonal businesses that experience varying steady and slow periods throughout the year.
Separate Business and Personal Banking
Many entrepreneurs blend personal and business banking. This practice is usually a matter of convenience when starting out. However, as your business grows, it can be an audit magnet and cause a financial disaster.
Separate your personal and business banking so that all money from the business flows into a business account. Then, follow a system for paying yourself and transfer your income into a personal account. Not only will this create an audit-proof paper trail, but it will also encourage you to draw a set salary.
Consult with a Financial Advisor
Don’t hesitate to reach out to a financial advisor for a consultation. As mentioned before, as an expert in your industry, you can’t be expected to know everything about finance. A financial advisor can help you put systems in place, highlight any areas of concern, and navigate the path forward to your goals.
You probably won’t need a financial advisor all the time. However, it’s a great idea to reach out when you’re getting started or if you anticipate changes (selling the business, scaling up, opening a second location, etc.).
Plan Ahead for Tax Season
Don’t limit yourself to the tax season mentality; focus on your tax plan year-round. Set aside time each month to put your paperwork in order and record your income and expenses. Otherwise, you risk having to dedicate hours of your valuable time in a frustrated panic when tax season rolls around.
Not only will being proactive help you stay ahead, but it will also help you maximize your return. If you struggle with this task, there are various apps you can use to record things like mileage and receipts from your phone, such as:
- Quickbooks
- Mint
- Mvelopes
- Everlance
- TrackMyDrive
- MileIQ
Using these apps makes on-the-go tax preparation a breeze.
Streamline Your Processes
The most successful businesses have processes in place. These standard operating procedures act as guidelines to keep the business moving forward. They turn operations actions into a habit that boosts efficiency, and ultimately, profitability.
Some focal points for streamlining processes include:
- Invoicing
- Customer service
- Employee onboarding
- Repetitive tasks
Having these processes recorded will also be beneficial in the event that you need to take time away from the business so that you can feel comfortable delegating.
When recording your SOPs, sit down and make a checklist of everything that needs to be done each day in each role of the business. Then, quickly outline the steps taken to complete these tasks. As you go through the list, you might even see a few ways you can streamline your efforts.
Outsource and Delegate
Speaking of delegating, outsourcing some of your work is a fantastic way to manage your small business expenses. It’s often one of the hardest leaps for entrepreneurs to take, but many end up wishing they had done it sooner.
Consider the daily tasks that need to be done to keep your business moving forward. Thinks like data entry for taxes, posting on social media, or producing invoices. Rather than thinking about what it would cost to pay an employee or virtual assistant to do these tasks, consider the opportunity cost of handling them yourself.
Think of it this way: you’re paying yourself to do these tasks. That means you’re forgoing income that you could be getting from new clients. If your desired hourly rate is $60 and you’re spending an hour entering receipts into your accounting system, it would be more affordable to pay someone else less to do so.
Furthermore, by outsourcing to someone whose primary focus is that area of work, they’ll likely do it better and more efficiently than you would by handling it yourself. Finally, outsourcing is a business expense that you can claim. It’s a win-win.
Automate Tasks
Investing in software that will automate repetitive tasks can increase efficiency in the business and help you manage your finances more effectively. For example, using an automated email marketing system can help you reach the right customers at the right time to boost sales.
Other common automatable tasks include employee onboarding, social media scheduling, and answering customer FAQs.
Financial Management for Success
By putting these simple procedures in place, you can manage your small business finances effectively. The key areas of focus are streamlining and boosting efficiency, tracking expenses while reinvesting in the business, and working with experts as needed.
Take your journey to better financial management one step at a time for sustainable habits and growth.
