Whether it’s big or small, financial management is an essential part of every business. Financial management is not merely limited to simply bookkeeping and managing cash flow. If you’re a small business owner, you need to consider your finances for many purposes, from preparing your business for the challenging times to creating strategies for growth during the good times.
If you want to start your own business and be your own boss, there are a few important things you should know before you lost all your enthusiasm and fall under the pressure. In this blog post, we’ll share 5 financial tips every small business owner should follow to keep growing and enhancing their success.
Create a Realistic Budget
The first and foremost step in successful financial management is to have a detailed and accurate budget. Before you start creating a budget, however, you need to identify what aspects of your small business you want to improve. Creating a realistic budget will help you decide where to use your funds. Based on that list, you can plan for your short-term and long-term business goals. A short-term goal can be buying inventory or equipment while a long-term goal can be keeping money aside for marketing and emergency expenses.
Here are a few steps to create an effective and foolproof budget for your small business.
- Plan your expenses and estimate your income
- Communicate with your suppliers and try to negotiate prices for the materials you need before you make your payments
- Track business revenue every so often on a monthly, quarterly, and annual basis.
- Manage and forecast your business’ cash flow
- Wisely spend your money and cut unnecessary expenses
- Use an accounting and cash flow forecasting software
Invest in Latest Financial Technology
Managing everything manually in your small business can be overwhelming. It’s important to leverage the benefits of the latest financial technology to keep a track record of your most important financial documents such as balance sheet, profit & loss statement, and cash flow statement.
Thanks to Fintech, today there are several cloud-based business tools that can help small business owners go paperless. These innovative tools can help you organize everything online and have a backup for all your financial documents and data.
Accounting, funding and cash flow forecasting tools allow you to better manage your finances and streamline business processes. They also allow you to keep correct and efficient business records, which will help you in tax preparation and filing.
Stay on Top of Invoices
Sending out invoices as soon as services are provided is crucial for a variety of business purposes. It will not only help you manage your cash flow and daily operations but also in better financial planning and management. Adding an innovative invoicing system into your financial armory will help you get paid faster and with little effort.
As a small business owner, making great relationships with your customers is vital to the overall success of your business and invoices are what document these relationships. With technology and a little hard work, your accounts can be running smoothly.
Here are a few tips to help you stay on top of your invoices:
- Keep your invoices simple and straightforward
- Keep communication transparent with customers
- Set your payment terms and explain clearly what you expect
- Offer discounts to your customers for early payments
- Send polite and professional reminders
- Consider adding overdue fees to discourage your customers from paying you late
Monitor Business Expenses
To make sure you’re spending money wisely, you need to track and monitor your business expenses. This is an important business practice, even if you’ve just started your new venture. For better financial management, you must keep track of your business on a daily, weekly, and monthly basis. Monitoring expenses regularly ensure you have always the correct and updated data available.
Planning for a variety of expenses such as payroll, rent, debt, interest, and other operating expenses can help you in reducing the financial burden and keeping cash flow positive even in tough and weird times.
Here are a few important steps to track and monitor your business expenses:
- Keep your personal and business bank account separate
- Choose from the cash or actual basis accounting methods
- Pen down your expenses frequently
- Organize all your receipts
- Maintain records of business travel spends
- Adopt an automated expense management solution
Maintain a Positive Cash Flow
Cash flow problems are one of the most common reasons why most small businesses fail. Besides boosting your sales and branding your products, it’s equally important to maintain positive cash flow in your small business. If you won’t have sufficient funds to cover short-term and other day-to-day expenses, you can’t keep run and grow your small business.
If you want to boost your cash flow, think about implementing some of the following tips:
- Send invoices right away
- Get customers to pay invoices on time
- Offer discounts on early payment
- Improve your inventory
- Increase price
- Use electronic payments
- Use an innovative cash flow management and forecasting software
- Use high-interest saving accounts
Final Thoughts
Running your small business can be exciting, it can be difficult too especially if you fail to manage your small business finances. The above tips will help you better manage your finances so you can boost the success rate of your small business.