You’re likely passionate about what you do when running a small business. That doesn’t always mean you have a background in business management, though.
There are lots of business owners out there who rely entirely on their accountant or bookkeeper to handle their finances. But the best way to be successful is to know what’s going on with your money.
It’s smart to have someone with an education in business finance helping you if you can afford the payroll. However, you should also know how to manage your finances yourself.
These tips will help you keep tabs on the ebb and flow of your cash so you can handle any problems fast!
1. Pay Attention to Taxes
The fastest way to get in trouble financially is to pay attention to your quarterly tax payments.If you wait until the April deadline and file annually, you might be in for a shock at how much you owe. Try to spread out your payments by filing quarterly instead. Put aside a certain amount each week to go toward these payments.
Quarterly is difficult for some businesses. You can pay monthly, too, if that works out better for you. When you make monthly payments, it makes it easier to treat your taxes like any other overhead expense. If you're looking for professional help, you should hire an expert on small business tax preparation.
2. Don’t Forget Yourself!
Many small business owners will put themselves last, paying operating expenses first. But even though this is a necessary part of the entrepreneurship life, you must also take care of your finances.You must pay yourself a regular salary covering your essential living expenses. If all those bills pile up, it may eventually cut into your business anyway.
Yes, it’s essential to cover your business’s costs. But if you cannot pay yourself, it’s time to start looking into cutting some overhead somewhere.
3. Invest Wisely
Successful businesses don’t just pay attention to the weekly and monthly sales. They focus on the future and how they can grow their companies gradually.These growth opportunities aren’t always free. Don’t be afraid to invest in your business in small doses to make big changes.
For instance, it will cost you to invest in a customer resource management system or upgrade your website platform. But those costs will more than give you a solid return on investment with the new sales they bring in and the time they free up for you.
4. Try to Avoid Loans
If your cash flow dips for a short period and you need some working capital, taking out a loan is tempting. But think about it. Now you have an extended monthly bill to pay for a temporary situation.As a business owner, you have lots of alternative avenues to financial solutions. A loan should be a worst-case scenario. Before you turn to bank loans to cover your costs, try:
- Adjusting your payment terms to encourage clients to pay faster
- Raising your prices, staying in line with the average industry standards
- An accelerated invoicing company that pays you immediately and collects your invoices from the client
- A business line of equity that you can pull from as you need it instead of all at once
5. Watch Your Business Credit
You know the importance of your personal credit score, but your business also has one. As you grow your company, there may be times when a lender looks at your business’s financial history and your personal one.Some of your suppliers will invoice your business. Some will invoice you directly. Make sure you pay your debts on time, and if you have credit cards in your business’s name, keep the balances down.
The better your business credit is, the lower your interest rates will be, and the easier it is to get affordable financing.
As your business expands, part of determining your finances' success is how much debt you have. If you must borrow money, ensure it’s a debt you can easily pay off quickly.
Conclusion
Whether you have someone who does your finances for you or you handle them yourself, you need to know what’s going on with your money.These tips will help you manage your business’s finances and avoid the common money traps a lot of business owners fall into!
