Having a brilliant business idea and developing a killer product is not enough for you to succeed. Research shows that financial problems are one of the major reasons small businesses fail. To keep your business afloat, you need to take your money management seriously, reduce operational costs and generate more cash flow and have a solid budget plan to back you up.
Here are a few vital steps to take.
Never Mix your Business’ Expenses with Personal Ones
One of the most common misconceptions among inexperienced business owners is that using the same bank account for their personal and business’ costs will save them time and hassle. There is a long list of reasons why you should separate your personal and business finances.
First off, using your personal accounts may make your business look unprofessional and hurt your brand image. Your target customers want to work with a legitimate business and not the individuals behind t.
Second, managing your private and professional finances simultaneously is tedious. It would take your bookkeeper hours to separate your personal expenditures from your business’ ones and pay taxes on time.
Finally, it would be difficult to take out a bank loan or apply for a government grant for your business when the need arises.
These are just some of the numerous examples why you should separate your expenses strictly. Don’t use your personal funds for your company’s purposes and vice versa and you’re golden.
Secure Funds on Time
If bootstrapping was enough for you to get off the ground,that is great. Unfortunately, it’s usually not enough to maintain a spotless financial health. Namely, your business is constantly growing and, with them,your expenses will be bigger, too. Your priority should be to estimate these costs and secure the right funding options on time.
For example, one of the most common options small business owners choose is taking out a bank loan. Yes, it’s safe, but it’s far from being perfect. First, you will probably have to wait for weeks before your application gets approved. Then, there are huge monthly interest rates which will hurt your small business’ bottom line. Not to mention that it takes at least 10 years to pay off a larger business loan. There is a wide range of simpler, alternative funding options you should consider, such as crowdfunding, finding an investor, teaming up with another entrepreneur in your niche, or even applying for government grants.
Build a Solid Billing Plan
Billing is one of the most significant business operations. Precisely because of that, you need to take it seriously and have a solid billing strategy. Your main goal is to get your customers to pay you regularly and, at the same time, maintain strong relationships with them. Here is what you need to do:
- Create a clear payment policy that ensures that your visions align with the ones of your clients. This is where you should state when you want to be paid, what payment methods you accept, how you will deal with canceled projects, or what the fees will be for late payments.
- Ensure your invoices are always sent out on time. Otherwise, your clients may get the impression that you don’t care about punctuality and deadlines.
- Inform your customers of any late or failed payments.
- Automate your rebilling strategy. The billing processes mentioned above require investing lots of time and effort. Luckily, you can invest in direct debit services and automate your payment processing and management. No matter if your customer has forgotten to pay you or their transaction failed for some reason, the app will inform them of the problem and help them solve it automatically. Additionally, you will be able to track your cash flow and invoices on one platform, in real time.
- Reward your customers for making payments ahead of time by offering great discounts, free products, or free shipping.
Learn more about Managing Money
Just because you’re a business owner doesn’t mean you are an accounting wizard. No matter if you’re working with an accountant or using automated software, you need to learn the basics of accounting. Understanding how your business’ cash flow works, you will be able to make wiser money management decisions, predict potential financial challenges and take the immediate steps to prevent them ahead of time. There are numerous online accounting courses for beginners, such as Fundamentals of Accounting, Financing Options for Small Businesses, or Udemy’s Introduction to Small Business Accounting Training Tutorial that will teach you about the different types of accounts, accounting terminology, payroll, and so on.
Pay your Bills on Time
Just like with your personal finances, it’s paramount that you pay your business bills regularly. Loan payment and credit card late fees are massive. The same goes for your utility bills, vendor costs, and taxes that may result in numerous penalties and even serious legal issues. To keep track of your costs and manage them effectively, you should set up monthly reminders or leverage automated bill payments.
Over to You
To survive in this highly competitive business world, you need to manage your money wisely. Do market research regularly to secure funds, learn the basics of accounting, encourage customers to pay you on time, and pay your business’ bills diligently. Above all, you should keep track of the market trends and your business’ performance regularly to predict major cash flow problems and solve them effectively.
How do you manage your small business’ money?
Guest author, David Webb, is a Sydney-based business consultant,online marketing analyst and a writer. With six years of experience and a degree in business management, he continuously informs the public about the latest trends in the industry. He is a regular author at BizzmarkBlog. You can reach him on Twitter or Facebook.