Every entrepreneur of a well-established business knows how challenging this job can be. From the outside, it may seem pretty straightforward. However, this couldn’t be more wrong. As a business owner, you have to think about various aspects, from building a team of skilled and professional individuals, staying updated and keeping an open mind to any innovations, thinking about future strategies taking into account changing consumer behaviours, and carefully planning your business finances. So, there is no way that the job of an entrepreneur is free from risks or even stressful events.
Every activity within the value chain, such as marketing and sales, logistics and operations, and customer service, is essential, and each one has its own importance in ensuring the success of the company. Plus, other functions and departments, like research and development or HR, are also vital for the growth of the business.
But a business’ finances, which are at the core of its infrastructure, is the key to financial health in any company, no matter its size. How you manage this aspect can make or break the future of the business, given that without a stable cash flow, return on investment, and revenue, it is exceptionally challenging to ensure the company has a future. Only by having an efficient management plan in place and using reliable software for accounting can you achieve financial stability and decrease the chances of failure and bankruptcy.
Having said this, if you are an entrepreneur of a small business and are slightly worried about properly managing your company’s finances, here are five helpful tips on how to overcome this challenge:
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1. Don’t Be Afraid to Invest in Growth
When it comes to managing your business finances, this doesn’t solely mean carefully planning your expenses, analysing the income and balance sheet, and making sure you have enough money to procure what is needed for your business to keep working. Entrepreneurs should always look for growth opportunities, whether they have a small business or a larger company. And when the time comes, to be able to invest in them to drive the business further.
Hence, it is of the utmost importance to set money aside when managing business finances. Just because you have a small business doesn’t mean that you cannot plan on expanding it and adopting innovative ideas that are relevant to today’s market and in line with consumer demand.
Plus, you shouldn’t rush into investing too early on. But entrepreneurs who keep an open mind and are forward-thinking are better prepared to take advantage when an opportunity appears.
2. Loans Can Be a Reliable Friend for Businesses
It isn’t uncommon for entrepreneurs to run away from loans. Generally speaking, taking a loan can be a scary thought, reason enough to worry about any financial repercussions from early stages, even when there are no reasons to. But because business owners fear having debt that could lead to bankruptcy, they stay away from loans.
However, loans can be a reliable friend, even for small businesses. The key is never taking more than you need and always have a clear plan on how you will be repaid. But the truth is that loans can provide the required capital businesses need when they have to acquire equipment, digital tools, or invest in their human capital.
Having a line of credit has proven to be essential and beneficial for small businesses. With this, you can support short-term funding requirements. Apart from having better control of the business cash flow, a line of credit can help you meet salary payments or pay suppliers on time. Plus, you don’t have to use it unless you truly need to. Not to mention that a good credit score allows for more investment.
3. Separate Bank Accounts Prevent Complications
It isn’t uncommon for small business owners to use personal and business accounts interchangeably. This means using personal banking accounts for business transactions and purposes and vice-versa. This should be avoided at all times, even if the company is small and may not have too much financial activity yet. In addition, when the time comes for paying taxes, this will represent a financial nightmare.
Separate bank accounts prevent complications and allow for a seamless running of the business and an effective finance management plan. It may sound like an unnecessary aspect to mention. But it is crucial to address this matter because it may seem easier to use them together when you have a small business, especially if you think digging out from a personal account helps the company.
4. Use An Accounting Software Program
If you want to keep it old school and use only spreadsheets, you can certainly do so. As a small business, you may not have too many documents to track yet. However, this shouldn’t be why you don’t opt for an accounting software program. Not to mention, these can be free or inexpensive, so it wouldn’t be a tabteck expense for the business.
Such an accounting program has everything you need to manage your business finances in one place. For example, QuickBooks is an online accounting software with various features that support businesses. All your bank and credit card transactions will be visible in one place, you will track invoices more efficiently, stay on top of taxes and manage all the business expenses.
5. Don’t Forget to Pay Yourself
Small businesses are easier to run, given that the workload and amount of planning are considerably lower compared to large companies. But at the same time, when you own a small business, it isn’t uncommon to put everything else before you and neglect your own salary in an attempt to allocate finances to essential business operations.
This being said, it is of the utmost importance to always pay your salary, as you are also a vital part of the business, as the owner and the leader of your team. Therefore, it is crucial to reward yourself financially for the hard work you are doing. When managing your small business finances, this aspect must be taken into consideration.