As a small business owner, managing finances must be the last task in your bucket. You must be more focused on generating sales and marketing products than checking the monthly accounts. But if you keep going on this way, you will end up losing a lot of money. Why? Well, finance management is what tells you whether you made a positive or negative cash flow this month. It also helps you with timely tax payments, better financial planning, and overall business decision-making. So, if you want to reach a stage where your business is so successful that it needs a bill counter, you definitely need to follow these tips for managing small business finances!
Set Up a Proper Record-Keeping System
Your small business might not have many assets or liabilities to create a balance sheet every month. It might be in its very initial stages with limited sales and expenses. But this doesn’t mean you shouldn’t have a proper record-keeping system.
All businesses must decide what financial records they need to maintain and how. The most basic ones are the cash-flow statement and the profit-loss statement. You may also create a break-even analysis sheet.
If you can’t do this yourself, hire a remote accountant to maintain your financial records and check them for accuracy.
Separate Personal and Business Finances
The biggest mistake small business owners make is operating from one account. It doesn’t matter whether you are a one-man show or a whole company. Your personal and business finances should always be separate.
If you don’t do this, you might actually end up spending personal money on business investments. This will apparently make your business run smoothly and improve the monthly statements. But, in reality, your personal savings will be wasted.
And since your monthly business statements won’t be accurate, your financial decisions will end up being wrong too. Hence, they are leading to failure in the long term.
Plan for Taxes
When running a proper business, you must pay some taxes. The types of taxes and the amount due will depend on your state. So, first, research them properly and then plan on how to pay them every month.
You must have a backup ready in case your business doesn’t generate enough money. Are you going to take a loan, sell an asset, or something? Think of a reliable funding source (more on this later!)
Research Your Funding Sources
As a small business owner, there may come several times when you go into a loss. Don’t panic because it is completely normal. You just need to prepare ahead of time and research what funding sources you can rely on during these times.
Some options include:
Each of them has their pros and cons. For example, banks will critically assess your credit score and may charge high-interest rates. Investors may demand a say in business decisions and become controlling.
You must evaluate the options in detail. Also, since you want to get the loan quickly, prepare a stellar business loan proposal in advance.