Effective financial management is critical for a small business’s success. In fact, most small-sized businesses fail primarily due to a lack of early cash flow. As an owner and entrepreneur, it’s up to you to ensure enough money is flowing into your business through sales to account for all expenses as well as revenue.
But what is “financial management” exactly? It’s not just prepping for tax season and paying your workers. Here are some tips that will help you maintain healthy business finances to allow your business to grow.
Audit your expenses
To understand where to put more money and where to cut resources, you need to critically look at your expenses. Where are you hemorrhaging money? Where are you slowing growth by limiting funding? For example, are you putting more money than necessary into outdated tools when you could be investing more into personnel training to ensure workers are fulfilled and productive?
Experts recommend you continuously look at and audit your expenses, at least bi-annually, if not quarterly. Asking yourself these tough questions will ensure you’re spending your money wisely and effectively, that every cent spent will benefit your business in the long-term.
Make a budget
Then, once you’ve thoroughly looked through the way cash flows out of or into your business, use these insights to create a long-term budget. Creating a financial plan and scope will allow you to stay within your means, cut down on those extra expenses, and ensure often-forgotten areas of your business are still getting resources. Always reevaluate your budget so it remains a fluid document that adapts to your changing business needs.
However, keep in mind that as a business owner, you should always leave room for emergencies. The current recession makes it clear that business owners must always be prepared for the unexpected. Create a rainy day fund that can hold you over while you create a response plan for any emergency, whether it’s a global pandemic or a flooded basement.
Utilize digital banking
For busy business owners, it’s important to digitize as many chores as possible so you can monitor everything from the convenience of your phone, especially in regard to your finances. Use an online banking service catered to small businesses for on-the-go reference of your cash flow, current invoices, and payment schedules. This will help you keep a pulse on your business’s finances at all times, and allow you to make changes as needed in real-time.
Digital banking will also help save you the hassle of having to travel to the bank to deposit checks or open new accounts, so you can invest your time more wisely in your business itself.
Hire professional help
An accountant or bookkeeper will help you stay organized and monitor your finances, and not just in tax season. They can help educate you about the financial process and ensure your company stays within financial compliance, ultimately saving you headaches down the road.
Find an accountant near you and set up a consultation to be sure you feel comfortable with them. It’s important that you trust anyone helping you with your money so you don’t have to waste time micromanaging them.
Taking these steps to protect your finances will ultimately help your organization become more successful and profitable. For more information on how to ensure your finances help your business grow, reference this guide: