Financial management can be the difference between a failing and thriving small business.
But money matters can be very challenging. While you’re so skilled and talented at whatever product or service you sell, you might know very little about financial management.
That’s why you want to spend some time learning about business finances and how to manage money.
Without further ado, here’s how a small entrepreneur can manage their small business.
1. Be the first to earn
Though it can be tempting to throw in everything you have into a startup, compensating yourself is essential for many reasons. First and most important, you need to keep business and private finances separate, which can be challenging to do if you don’t pay yourself.
Second, your personal needs never go away regardless of how passionate you are about growing your business, so you need cash to sort them. And third, for goodness sake; you deserve your cut of the cake!
2. Put aside something for expansion efforts
Always think growth and put money into it! Finance growth initiatives after a thorough ROI analysis.
One way to ensure your growth efforts work is to allow your team to be innovative in satisfying ever-changing customer needs. Be willing to invest in tomorrow if it’s worth it.
3. Streamline your billing
Overdue invoices can cause significant cashflow snags to a growing business. If you have lots of those then you need to change your billing approach. Research and learn what a small business can do when clients are reluctant to settle invoices.
4. Pay taxes in bits
A three-monthly or quarterly payment plan can make you forget about taxes. Shift to a monthly routine to stay on top of your business taxes.
5. Check your records
A dedicated entrepreneur must save time to review financial records on a daily, weekly, or monthly basis. This kind of monitoring and tracking ensures you always have an idea your financial status and know when to take corrective measures.
6. Always Compare Spending vs. ROI
For every spending you do, try to determine the return on investment. Failure to do so can mean wasting finances on unimportant matters in an environment where money is a scarce resource.
7. Develop good money habits
Be strict with finances. Avoid impulse and unplanned spending. Keep everything on record. Set things straight with your bank.
8. Borrow wisely
Debts can ruin your credit score and take a toll on your business. Look at “small business loans and borrowing” as a sub-topic under financial money management.
9. Plan your business finances
Lastly, it would be best if you plan your finances. Entrepreneurs who fail to plan their finances spend carelessly and may never get the chance to grow scalably.
For new business owners, managing money is a challenging task that takes time and practice to master. Failure to set your finances straight may lead to cash flow problems and threaten to hinder operations.
Author Bio: Michael Hollis is a Detroit native who now lives in Los Angeles. He is an account executive who has helped hundreds of business owners with their bad credit merchant account solutions. He’s experimented with various occupations: computer programming, dog-training, scientificating… But his favorite job is the one he’s now doing full time — providing business funding for hard-working business owners across the country.