If you’re starting your small business alone with weak money management skills, you’re really risking your business.
Starting a small business can be extremely rewarding. However, single-handedly balancing your books can seem like a momentous task.
A small business has many different expenditures during the initial period of operations, which can seem overwhelming.
However, if you manage your resources right, it is not impossible. Education and organization are the two main factors when it comes to managing your small business’ finances.
One of the major things you will need to do in order to manage your company’s money is to create an action plan.
There are many benefits to being on top of your business’s financial organization.
For many people, their small business does well because of their expertise in a particular field – however, many first-time business owners, have no experience with properly managing company finances.
It can be difficult to know where to start, however, if you follow this starter guide to money management for your small business, you will be better educated and able to formulate a proper financial plan.
Pay Yourself
When running a small business, it can be all too tempting to put all of your money into everyday business operations.
Growth and success can be addictive, and it can become all-consuming – this means people often decide to forego a payment and put all of their money into expanding business operations.
However, owners should never overlook their own role within the company and should compensate themselves.
If the business doesn’t work out after you don’t pay yourself, you will have lost everything and have nothing to your name.
It makes more financial sense to ensure that you are being paid for your work.
Don’t Be Afraid Of Loans
Loans have become a bit of a dirty word, especially for small business owners.
Inflation and interest rates are currently high, which can cause anxiety in people running a small business.
However, there is economic evidence to suggest that taking out sensible loans could actually facilitate your business operations.
Obtaining loans can result in an increased influx of capital and can also boost your cash flow.
This means you will have fewer issues with paying suppliers and employees on time, meaning your reputation will grow as a business.
If you shop around, you may be able to find a great business loan that accommodates small businesses.
Work On Your Credit
However, in order to get good loan rates, you will need to ensure that you’re business credit is up to scratch.
As your company grows, you may need to purchase commercial real estate, which will require good credit on your part. Expansion is dependent on your credit health.
Make sure that you are paying off all of your debt funding as soon as you are able, and paying off your business credit cards as soon as you can.
This is a great way to keep on top of your credit health and build the foundations for a good financial future.
Invest, Invest, Invest
From the minute you start operations, you should be looking at where you can set business funds aside so you will have the opportunity to invest in your company’s growth.
Investments could allow your business to thrive and maintain a healthy financial direction.
A business that wants to grow should prove to its employees and customers that it is willing to invest in the future – it is not stuck in the present.
Looking for the best growth opportunities will ensure that you’re making the best financial plans as your company grows.
Chase Up Billings
Every seasoned business owner will tell you that there is always at least one problem client who is always late on their billings.
This can be especially frustrating when you’re running a small business, as you will depend on having good cash flow, particularly in the early stages.
However, you can prevent this damage by having a good billing strategy.
By changing the payment terms of your billing (e. 2/10 Net 30 payments) you will encourage on-time payments and better protect your business’s cash flow. This is important when you’re setting up a small business.
Keep On Top Of Your Books
Whilst this seems obvious, it is important that you keep on top of your books and records.
Even if you employ a bookkeeper, you should be carefully looking at your financial records yourself.
Knowing the finance operations of your business intimately will allow you to manage it a lot better.
If you are fully aware of your finances, you will be able to make better decisions when it comes to optimizing cash flow and investments.
Neglectful bookkeeping can unfortunately set up a small business for wasteful spending, or even embezzlement.
Focus On ROI
Monitoring all of your expenditures and your company’s return on investment carefully is one of the best things you can do in order to protect your finances.
Knowing about ROI can make sure that you know which of your investments will be the most successful and lucrative.
You should also educate yourself on when to step back from a bad investment, as non-successful investments can slowly chip away at your business’s funds.
Protect Your Business
While investing in opportunities is always a good idea, you should also consider investing in protecting your business.
Insurance is one of the best investments you can make when it comes to your business.
It is important for a small business owner to plan for when things go wrong so that your business doesn’t crumble under pressure.
For example, getting public liability insurance will protect you in case you cause damage to public property or accidentally injure anyone.
If you’re exporting goods, credit insurance can really help you if your clients can no longer pay you.
Export credit insurance can protect you if you’re exporting goods overseas, which can be very useful when you expand your business.
Professional indemnity insurance can protect you if you are ever accused of providing faulty goods or bad advice.
There are many types of business insurance that you should consider buying, as in the long run, it could save you a significant amount of money.
Managing your money when running a small business can initially seem overwhelming, however, by following this starter guide you will be able to create a functional plan.
This will set you up for future financial success.
