4 Tips for Managing Your Small Business Finances
When aspiring entrepreneurs dream of starting their own business, following up on unpaid invoices, balancing the books, and tracking expenses for taxes are usually not the activities they picture doing. Yet, managing small business finances takes up a lot of time and figures heavily into the day-to-day responsibilities of most small business owners. Financial management doesn’t have to be difficult or overly time-consuming. By keeping organized and following these best practices, you’ll be able to stay on top of your business’ finances.
Keep ’em Separated
When you’re just starting out, you might not see a need to keep your personal and small business finances separate. But, it’s a good idea to do this from the beginning in order to solidify the habit. Open a bank account and a credit card in the name of the business right away. Though you’ll still be personally responsible for any debt, creating separate accounts will not only help you stay organized, it will help your company start building business credit. When you’re ready to take out a small business loan, you’ll be glad you did this! If you use your business credit card for everything business-related you buy (and pay it off promptly) you can use the statement to easily track and monitor expenses.
Help! I Need Somebody!
There is no shame in asking for help, especially when it comes to running a business. You may think you can do everything yourself at first, but you will quickly learn there can be tremendous value in paying an expert to take care of certain aspects of the business for you. Accounting is an area that many entrepreneurs find tedious and confusing, so taking this off your plate can be a relief. Also, when it comes to taxes, it can help to have a skilled accounting professional guide you in the best ways to file to ease your company’s tax burden and avoid unnecessary penalties.
I Will Remember
Small companies can easily get tied up in cash flow issues if they don’t stay on top of invoicing. Set a reminder on your calendar each month (or more often, depending on your billing practices) to send your invoices. Set another reminder when they are due. If you haven’t been paid, immediately follow up on the invoices. Set another reminder to follow up in a week and so on until you get paid. Accounts receivable work isn’t fun or glamorous, but it’s what keeps your business afloat. Since playing collections agent is not something anyone wants to do, many small business owners procrastinate or just forget to follow up on unpaid invoices until they are in a desperate situation. Don’t be embarrassed to advocate for your business in order to get paid for your work! If you feel uncomfortable talking with clients about payment issues, consider hiring an outside party (or even a friend) to do it for you.
I’ve Got My Eyes on You
Take time out at least once a month to really examine where the money is going within your business. Do a simple analysis to figure out if there’s anywhere that you need to cut costs or invest more. You can create simple spreadsheets to do this in Excel, or you can purchase small business accounting software that can help do this for you, such as QuickBooks or Wave. Without analyzing your finances, you’ll never truly know what’s working and what isn’t in your business. If you want to grow, closely monitoring your finances is essential as it provides an objective gauge on performance and progress.