No matter how in-demand your product idea is, or how exemplary your service as a business is, if your financial handling isn’t up to scratch, then this can easily lead your small business down a bad path — and could even risk failure altogether.
Why is it Important to Take Care of Your Finances as a Small Business?
Small businesses can be of greater risk of financial struggle because of their limited financial backing compared to huge companies, especially if those small businesses are new, up-and-coming, or have been started by entrepreneurs who don’t have much financial backing.
Every decision you make from the very beginning can affect your finances as a small business long-term, and you don’t want to risk running into problems and accruing debt before you’ve even got off the ground.
Having a firm understanding of your cash flow and finances is key to success.
Signs Your Finances Need Close Attention
– You’re having cash flow problems
– You’re having trouble paying bills on time
– You’re having trouble paying your taxes
– Your finance management is poor or neglected
– You’re failing to develop a good relationship with suppliers or creditors
– You’re running into constant problems or complaints
– You’re breaking even instead of making a profit
7 Methods to Take Better Care of Your Finances
1. Owners Should Ensure to Pay Themselves
Being a small business owner doesn’t mean pooling all your money into the good of the business and never paying yourself. You’re an integral part of the business, and you need your own personal finances to be just as healthy. If you’ve set up your own business to be your own boss and make a steady income on your terms, then you need to ensure you’re actually receiving an income from it.
2. Look for Discounts When Setting Up or Updating
If you need to kit out your business with key items, like computers or phones, or you’re looking to update to the latest versions, then always look for ways you can save money. Using discount codes for big brands, like a John Lewis discount code, can help you to save money on key items needed for your business. Or, it could be as simple as needing a new television for your business reception, or basic electrical items for your employee cafeteria. Every saving helps.
3. Look for Growth Opportunities
One key area to invest your money is in growth. You should believe in your business and its growth potential and have others (like employees and customers) see that you believe in that, too. The only way that your business is going to develop for success and earn more money is if you implement investment into its growth.
4. Make Your Payment Terms Clear and Strict
One problem you can easily run into is clients who don’t pay on time and constantly drag their feet every time they receive an invoice. By setting clear payment terms from the very start with a strict payment date, you’re ensuring that there is no confusion over when your customers need to pay.
In line with this, you should also have an organized invoicing procedure and record, so that you can easily see when invoices are overdue and chase them up.
Failing to receive client payments on time can easily snowball into bigger financial problems, such as your business being unable to pay suppliers or bills until your client has paid.
5. Make Tax Payments a Monthly Outgoing
Huge tax bills needing to be made at every quarter can seem like a significant amount of money all at once, and if you’re struggling to pay, it may be better to spread out your tax payments into a monthly saving. Saving a small amount each month in the same way you would pay for any other monthly outgoing means you can save the right amount towards your total expected tax payment. Therefore, you’ll have the right amount already saved throughout the year when it comes time to pay the bill.
6. Keep Track of Your Books
You always need to set time aside to look at your records and understand your finances. Not only does this help you keep track of all payments, but it also ensures you spot any problems or anomalies which may need looking into.
Be sure to implement a proper system and structure for your bookkeeping. Small businesses can often run into problems of limited time, and limited staff, which is why routines like consistent bookkeeping can easily slip under the radar, but setting up a schedule for yourself (such as reminders) to do this will be crucial.
7. Set Up a Financial Plan
Every business upon starting up should have a developed business plan, which includes a financial plan and budget. This financial plan needs to constantly be updated and needs to consider expectancies for years to come. This sort of planning for your finances — both present and future — will help you to understand your goals and stay on track, as well as better understand when you’re running into problems or veering away from your goals.
With proper planning and routine, there is no reason why you can’t feel more comfortable with your small business finances. If you’re a small business owner that is just starting out and do not feel confident in the realm of finance, then research is essential. There is also nothing wrong with seeking external help from those equipped to help finances, such as an accountant or bookkeeper. As a small business owner, success is based on your ability to understand your own strengths and weaknesses and seek additional help for those areas which you’re not strongest in.