Managing finances for your small business can feel overwhelming. For many small business owners, your success lies in selling the service or product you’re known for. Not all owners are prepared to handle the details of business finances – it’s a lot of paperwork and it can be monotonous. Unfortunately, if you’re not on top of your paperwork, you can slip into bad financial habits that can really hurt your profits.
It’s critical that you educate yourself as a business owner. Simple accounting like applying for a loan or drafting up financial statements are necessary to create a strong future.
If you’re feeling like you’re in over your head with your business finances, follow the tips below for managing your business budget.
Tip #1: Pay yourself first
Many small business owners try to put all their profits back into their business. With that said, it’s critical to remember to pay yourself, too. If your business finances look great but your personal finances are shot, your personal woes can quickly bleed into the company as well. If your credit scores begin to drop, you may be ineligible for certain business loans, for example.
So, make sure that you pay yourself in addition to others working for your company.
Tip #2: Think about growth
Besides giving yourself a paycheck, which is incredibly important, you should also invest in your company’s growth. Consider consulting a wealth management company if you need help organizing the smaller details of your business accounting.
It’s important to put some of your business profits back into the company so you can help it grow and expand your production line, hire more employees, or even open up more locations.
Tip #3: Create a smart billing strategy
Businesses depend on good relationships with clients and customers. But sometimes, there’s a few clients or even just one who you depend on that seem to avoid holding up their end of the bargain. If you have problem clients who are always late paying invoices, for example, your cash flow can be negatively impacted on a day-to-day basis. This is particularly an issue if you’re a small business dealing with a small business budget. Running on thinner margins means there’s a lot less room for client lateness.
The worst-case-scenario that could happen from clients who can’t pay is business failure. When too much cash is tied up in unpaid invoices, it’s inevitable that business will suffer as a result. Chronic late-paying customers can be managed by changing up your billing strategy.
For example, you can offer clients a discount if they pay their bill within the first ten days of receipt. Offering an incentive to pay on time means that you can reap the benefits of early payment and the client gets a deal, too! Everybody wins.
Tip #4: Make monthly tax payments instead of quarterly
If you’re concerned about taxes, you can always opt to split your tax payments into monthly payments rather than quarterly. This allows you to pay smaller amounts over a longer period of time rather than paying for larger quarterly tax payments.
Tip #5: Keep tabs on your accounting
Set aside time each month or week to review your books. As the business owner, it’s critical you have both a high-level and granular insight into what your company’s finances are – even if you’re working with a professional bookkeeper.
Tip #6: Remember ROI
Are you thinking about launching a far-reaching digital marketing campaign? Are you considering opening up a second location in a city hotspot? Before you make these kinds of decisions, it’s important to crunch the numbers to determine your return on investment or ROI. Use historical data to inform your decision and to determine whether or not similar actions have paid off in the past.
Conclusion: Managing business finances, one dollar at a time
If you own a business, you already have a ton on your plate. After all, you need to manage your employees, sell your service or product, and attract new customers. But even if you’re distracted by the other needs of your business, it’s incredibly important to keep up with your business finances. While it’s smart to rely on a financial professional if you can afford it, don’t forget or neglect to look at the books yourself, too.