Finance

How Do You Manage Your Small Business Finances? 10 Tips For Success

Written by Nathan

Managing a small business, especially in its earlier years is always going to be a challenge, especially when it comes to keeping the business stable. One of the biggest challenges which comes with this is managing finances.

If you are capable of managing your finances well, your business is much more likely to succeed, and if you are poor at doing this, then the business is more likely going to fail.

This is of course going to be easier for you to achieve if you already have skills in managing finances, especially if they are related to running a business.

How Do You Manage Your Small Business Finances? 10 Tips For Success

But of course, this means that you are at a disadvantage if you do not have these skills already.

And while it will take years for a lot of these skills to start coming naturally to you, there are some easy ways to start learning which can come from very simple advice, simple advice which we will be providing here.

If you do not have proper money management skills, you will start to treat managing your finances like a burden, and this can lead to slipping into bad habits, and these bad habits can become very harmful in the long run.

If you want a successful business, you will soon understand just how important financial management is, and start to see it as an integral step which needs to be taken.

The best way to gain these skills is to educate yourself regularly with sources like this, and making sure to not lose track of your finances.

There are some basic skills which you will need to know when starting a business, like making financial statements, applying for loans, or accounting, but you will need more than this to stay as organized as possible!

So, to give you all the information you need, we have split our advice into 10 points which we think are the most important steps to know, so if you need to know what they are, keep reading!

The Best Advice For Managing Finances Of A Small Business

Some of these will apply to you more than others, but all of these pieces of advice are worth taking if you are worried about financial stability.

Make sure to read through the advice carefully, and choose some points which will be the most helpful for you which you should prioritize!

1. Make Sure To Pay Yourself

Something which small business owners commonly forget to do is pay themselves since they are putting so much energy and budget into their operations.

Of course if you are passionate about the growth of your business you want to put extra capital into the growth of the business. 

However, this should not be done at the expense of your personal financial status. It is worth knowing that the best businesses also have financially stable managers.

You are part of the business which is integral to running it, and if you are not compensating yourself, you will not be helping in the growth of your business.

2. Invest Into Your Growth

Paying yourself is important, but once you have done this, extra funds should be going back into the business to help it grow as much as possible.

You will want your business to be heading towards a healthier direction financially, and by keeping the future in mind, you will be able to get the best results.

All of this growth will of course need to be invested into, so the best way to do this is to use any excess funds and funnel them back into the business.

This effort will be noticed by customers and employees and it will give your business a much more positive perception.

For example, if employees see you spending on the business instead of yourself, this will inspire a sense of loyalty and will encourage them to want to work harder.

3. Do Not Be Scared Of Taking Loans

We have all heard horror stories about loans, and all the negative impacts they can have. This has led to many smaller business owners being terrified of using loans.

However, by getting the influx of capital from a loan, you will have more resources to be able to face any financial challenges which may help your business avoid financial failure.

You can also use loans to help with paying employees or suppliers which is good for keeping up a positive perception.

Of course when taking out a loan the most responsible thing to do is have a plan on how and when you plan to repay the loan, and this will make the loan feel a lot more manageable and like less of a burden in the long run!

4. Ensure You Are Keeping Good Business Credit

If your small business is starting to grow, you will be tempted to spend more on the business, whether this is real estate, insurance policies, or more of the aforementioned loans which were just mentioned.

However, if you have bad business credit, being able to do this will become more and more of a challenge, and these payments may not be approved.

This is why you will want to ensure that you are staying on top of your credit and ensuring that you are paying off your debts as soon as you can.

How Do You Manage Your Small Business Finances? 10 Tips For Success

A good way to keep this good credit is to not let your business cards have a balance for too long, and avoid loans which have an interest rate which will not be affordable in the long run. Make sure your funding can be repaid!

5. Have A Strategy For Your Billing

When running a business, there will always be customers or clients who are not great at paying invoices on time.

If you are a small business this will affect your cash flow depending on the size of the customer, so you will need to have a good strategy for getting funds from these people. 

You will want to make sure that these outstanding payments are not stacking up, and the best way to do this is to give incentives for customers to pay on time, or quickly.

For example, some businesses offer small discounts for paying quickly, this is a great way to discourage outstanding customers.

6. Spread Your Tax Payments Out

Some people change the way they pay their taxes to make the operations of the business seem like less of a burden.

For example, if you are struggling with quarterly tax payments, contribute towards them monthly and treat them as a standard expense this way.

Then you will not feel the burden of an irregular impactful payment as much. Using strategies like this will ensure that your credit is able to run more smoothly as well. A lot of these points are interlinking, so improving some will also aid others as well!

7. Monitor The Books

One of the best things you can do to stay on top of everything is to make sure you are setting aside time to stay on top of the books.

Even if you already have someone hired to be able to help with this, you will still want to keep an eye on this yourself to ensure that you are familiar with the inner workings of your business.

By keeping an eye on your spending you will be able to look out for any potential bad practices, or give you insight on how to save money which is of course a priority of small businesses.

8. Focus On Your Expenditures And Your ROI

One of the best ways to keep an eye on your investments to see which are worthwhile and which are not is to measure your expenditures.

You will want to stay aware of how your business is spending its money and how this is impacting the business. 

You will want to focus specifically on the ROI which is coming with expenditures, this will help keep you aware of which investments are worth keeping, and others which are a waste of your money.

This money could instead be spent on the business and could promote personal growth which will often end up being more profitable.

9. Keep Good Financial Habits

This seems like a more obvious point, but making sure to keep good habits with money will nearly always lead to good results.

This could be as simple as dedicating time to reviewing financial information about the business, and keeping yourself updated, will always help you see potential issues from further away, and adapt to them and be able to overcome them.

These practices are even more important when dealing with employees as well.

10. Keep Planning

This is also related to some of the previous points, but if you keep planning, you will always be better equipped to deal with any potential issues.

If you always know what your next step is going to be with your finances, you can prepare for the impact it will have on you and your business!

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