Tips for Managing the Finances of Your Small Business
By Space Coast Daily // August 1, 2021
When it comes to having a small business, you may encounter different challenges, and most of them are related to money. So, staying on top of your small business finances is crucial, especially if you want to maintain financial stability and a continuous cash flow.
Managing Tips 101
The following are several tips you can use to handle your small business finances:
Prioritize Your Small Business Financial Planning
Accounting, budgeting, risk management, tax planning, and forecasting are the essential aspects of your comprehensive small business financial plan.
It would be best to analyze financial statements and accounting reports to gain insights into your small business’s current performance by using online accounting software. Also, proper bookkeeping and accounting will help you set the right financial goals.
Preparing ahead will also help in avoiding tax season stress. If you have organized bookkeeping and records, there’ll most likely be less room for mistakes. It would also be beneficial for you to learn how to reduce your tax burden as a small business owner. Feel free to consult an accountant if you have trouble dealing with tax concerns.
Business and Personal Finances Needs To Be Separated
It’s vital, for tax and organizational reasons, to separate your business and personal finances. By separating these two, you’ll be able to easily handle your requirements and bookkeeping while paying your small business taxes.
Besides the tax and organizational reasons, separating these two types of finances also have some legal implications. Your personal finances will not be affected if your business finances get into legal trouble. It’s also the case if it is the other way around.
Handle Cash Flow
If you want to ensure the financial health of your small business, you need to learn how to manage the cash flow efficiently. For starters, you need to evaluate all your small business expenses and overhead costs to know your overhead rate and keep track of it regularly. It’s also vital to assess your small business reports and your financial and core business operations concerning your operating margins and sales.
Once you have a grip on your small business costs and margins, you can leverage several financial services and tools to handle cash flow and funds with business banking. If you are considering getting business credit or debit cards, it’s essential to evaluate your liability, purchase, interest needs, and credit.
If you want something that can help your business grow, financing is a good idea. A business credit card or a business line of credit can be a good choice for short-term financing. You can also choose to get a personal loan to fund your business needs through an online lender such as creditninja.com and other credible lending companies.
Improve The Payroll Process
Most small businesses find it challenging to make payroll even if they’re taking in enough revenue. Optimizing your payroll process improves your cash flow, making it easier for you to pay the employees every payday.
You can start by getting payroll software that can provide you with a direct deposit. It’ll help transfer your employees’ pay directly to their respective bank accounts. If you choose paper checks, the money will more likely undergo a holding pattern since most employees deposit their checks at different periods. It might seem a tiny detail, but choosing direct deposit can help you gain control over your small business cash flow.
It’ll also help if you choose a payment schedule that abides with all state guidelines and provides your company with the most financial autonomy. You should select a payment schedule that coincides with the cash flow of your business. When employees get paid sooner, they can have ample time to make many informed financial decisions.
Optimize The Inventory Accuracy
It’s necessary to have inventory accuracy, especially during uncertain times. Some businesses tend to get overwhelmed with excess inventory. On the other hand, others do their best to keep up with outpouring customer demand. Both scenarios can lead to poor customer experience, financial instability, and lower sales if business owners fail to maintain their stocks.
Alleviate the Supply Chain Risk
It is vital to know that the supply chain volatility and disruptions have impacted restaurants, retail, and healthcare. Strict supervision can be helpful to manage the demand and to collaborate with suppliers to ensure the supplies. It alleviates the risks to product access and makes sure that your client experience continues to be positive and reliable.
To do this, you can adjust your supply chain strategies, have backup suppliers, and track your existing orders and contracts. Furthermore, for better plans, it is best to revisit your business and supply chain plans.
Keep Track Of Your Small Business Credit Score
You need to take care of your small business credit score because, at some point, you’ll need to gain access to credit. To approve a business loan or a business credit card, the lender will assess your business and personal credit rating as well as your credit history.
Lenders will still look at your personal credit score even if your business credit score is good. They do this to analyze how well you can pay back your business loan. The higher your credit scores are, the better your chances will be to get a loan. A high credit score can help you get the best loan products with flexible terms and conditions.
In other words, knowing how to handle your personal credit score is also key to managing your small business finances effectively.
Below are some tips you can use to boost your credit score:
■ Pay all of your bills on time;
■ Don’t exceed your credit limit;
■ Keep track of your credit scores regularly to know irregularities quickly;
■ Don’t max out any of your credit cards;
■ Consider having a mix of credit (only recommended if you are sure you can repay all of your debts).
To Sum It Up
Managing small business finances is never easy. You’ll need to learn so many things to obtain financial stability and a positive cash flow. Knowing how to handle your small business finances is a step-by-step process; you don’t become an expert overnight.