Are you a small business owner looking for some helpful advice? While it’s easy to get unsolicited tricks of the trade from those around you about how to better manage your business, finding professionals in your field for guidance will always be your best bet, especially when it comes to finances.
If you’re a small business owner, you know how difficult it can be to regulate the day to day operations of a company. The economics of your business is no different! That said, there are many tried and true tips that have been put to the test time and time again that are guaranteed to keep your monetary ledger in the green and out of financial trouble. Here are three financial tips every small business owner needs to hear:
Tend To Your Personal Finances
You never know what sort of alternative financing solutions you may need down the line, so keeping your personal pecuniary matters at a healthy level should be of utmost importance. The best way to ensure that investment opportunities will be available to you in the future is by tending to your personal finances.
Should you need a loan at some point in your business venture, you will have to have an adequate credit score. The minimum credit score for an SBA loan, or even a home equity loan for that matter, ranges from 620-640. While you could still use a personal loan to bail you out of monetary trouble, common terms and conditions don’t allow you to borrow as much as you might need and interest rates are typically higher anyway. Therefore, it’s imperative that you keep your score as high as possible just in case you need financial assistance at some stage of ownership.
The components of a high credit score will also help keep your finances in check. Each person’s score is calculated using five major factors including your payment history, amounts owed, credit history length, credit mix and new credit. Both your payment history and amounts owed add up to over 60% of your score, so paying bills on time and in the right amount is vital in making sure your finances are fit as a fiddle.
In today’s day and age, going paperless is one of the easiest ways to keep your finances in order. With hordes of paper, you can easily lose track of important documents and balance sheets. Rather than spend hours filing paperwork into designated cabinets, create a database with pertinent information related to your business on a computer.
With the introduction of cloud-based technology, all of your financial statistics can be stored in one place — on your desktop, your tablet or even your smartphone. This makes figures easily accessible for the next time you have to do an audit or file your taxes. You can also compute data so you can clearly see spending patterns and make adjustments based on your specific business needs.
On top of all that, going paperless when it comes to billing will also save you a lot of time and frustration. Setting up automatic payments for services that charge you each month guarantees your expenses are being allocated in the right amount and provides peace of mind in knowing you will never have to pay late fees.
Manage Your Debt Effectively
Debt is and always will be something people experience, whether they’re a business owner or not. It’s how you manage your debt that will set you apart from other consumers in terms of financial security.
When you have your own business, you should try to avoid bringing debt from one fiscal year into the next. Business payments can pile up quickly and if they aren’t managed properly, you could have outstanding charges on your hands. Upon further review, you can implement a thoughtful strategy as to how debt will be paid by assessing your payment schedule and evenly distributing it throughout the month.
Budgeting is another key piece of the money management puzzle. By keeping track of what exactly is going out in terms of payments and what exactly is coming in through income, you can get a better understanding of how you should be disbursing funds or where you should be cutting down on expenses. This is also a great way to boost your savings so you can devote money to supply a safety net, especially during times of economic downturn.
No matter what your financial status may be, incorporating a few of these helpful tips is sure to help boost profits and improve your bottom line. Keep in mind that if you still feel you need assistance, talk with a certified professional like a business accountant or bookkeeper so you can be comfortable with whatever sort of enterprise opportunities arise without putting your financial well-being in jeopardy!