Poor handling of business finances can kill a business in its startup phase. It is crucial therefore to have information on how to manage the business cash.
10 Tips on How to Manage Small Business Finances
Poor management of business finances can pose a lot of challenges to your business from insufficient cash flow to the inadequate filing of tax returns, and much more. These sorts of challenges are a source of serious risks, especially to small businesses. Virtuous habits of bookkeeping, on the other hand, help the business to only survive, but also survive.
So what does managing of business finances entail? What are some of the practices that entrepreneurs should adopt to make sure that the business finances are managed well? Here are 10 crucial tips on how to manage the finances of a small business.
Get an expert help to compile tax returns
Business owners are involved in a lot of activities. That explains why you should get a professional to handle the work that you are not qualified in or do not have time for. Just like majority entrepreneurs, you went into business to follow your passion, and not to be a sales person or an accountant. In most cases, outsourcing certain tasks to someone who is able to do it better and quicker is way smarter than tackling it yourself.
Certified accountants can do more work than just ensuring your money is well balanced. A professional financial eye can quickly realize ways through which the accounting procedures, and possibly the business itself can be enhanced and therefore effectively managing the finances.
For instance, majority businesses are not cognizant of all the duty deductions they are entitled to so as to decrease their overall tax burden in due course. Getting someone cognizant with the processes can come in handy with that.
Don’t go totally “laidback”
Getting someone to do the work does not mean that you dedicate the work entirely to someone else. As the business owner, you will be required to play a crucial role in the managing the finances by reviewing reports, knowing everything that is going on with the business, and asking the questions whenever you need clarity.
Whether you have little or no expertise in a certain area like accounting, you still have to make an effort to get familiar with basic mathematics like balancing injections and withdrawals, expenses, profits, and the working of client funnel. These are the ‘heart’ of the businesses and they will require the full attention of the business owner.
Equip yourself with the right software
Investing in a good system to do the important work is crucial. Managing the business cash does not have to be entirely manual. Some software like accounting software is a good investment. There are lots of options in the market, so get one that will cover most needs of the business in terms of finances. If you do have basic accounting knowledge, then avoid software that requires a manual to get started because they may confuse you.
If you’re searching for a shortcut, request for endorsements from close people who run a similar business as yours.
Note down your processes
For my business, I have written documents that detail the manner in which finances are run in my business. Though I do not use any professional procedure I understand exactly what is noted down. What is important is to keep a track of any transaction.
Being consistent is the key for good finances management and plays a huge part in helping the business owner to spot mistakes later on because you have an idea of where an error might have occurred.
Keep expense receipts
You can never know the much you are spending on the business if you do not keep the receipts. This is somehow upfront for credit card acquisitions because you will have both monthly reports and receipts alongside which to check them.
Cash expenses can mess you up if you are not careful. Cash Expense receipts should be keenly followed because there are no statements to back them up. Some business people have a notebook for recording cash overheads as they are incurred. As mentioned above, some people decide you can decide to use an accounting app that requires you to take a picture of the manual receipts.
Keep a track of receivables
Issuing invoices is one thing, and making sure the invoices are paid is another thing. Keep updated information of your invoices and their status, whether paid, sent, half-way paid, or received. Managing of finances requires clean records, and it would be necessary to keep different invoices in different files.
Work as a team with your Accountant.
It is common that some business owners see their accountants as an additional expense, and only ask for their assistance during tax crisis times. A trustworthy accountant, though, can be an important confederate in your business, assisting to direct its trail to victory, modeling it to offer better proceeds, and helping notice potential threats to the business finances before they come up.
Entrepreneurs ought to see their accountants as business associates, not just to prepare tax returns. As a business owner, you should look for a professional who will propose insight into the venture. A good accountant is one that should share the vision of taking the business to the next level.
Seek a Loan Soonest possible
One Mistake that business owners make is to wait till the business hits a financial downturn before they could apply for a loan. A business is less likely to receive a loan when it is not doing well. To avoid that, get a loan when the business is at its peak. With that loan, you can expand your business or use it as a backup credit line instead of salvage.
Arm yourself with Enough Capital
In most instances, small business owners are hit with the challenge of lack of capital to see them through the startup period. To thwart this, it is advisable to save three to four months living expenses plus any additional money that you will require for the expenses of the business. Manage these finances if you have no expectations of receiving immediate revenue from the business.
Minimize Travelling Costs
Travelling is expected when starting a business but is it advisable to minimize such costs. A meeting with a business partner to discuss location and probably expansion can be done via Skype and use the finances that would have been incurred for the business. In case you will be required to travel, avoid spending your finances on luxurious and expensive hotels. Doing so sets a bad example to the personnel and can be an unreasonably huge cost with little profit.