Finances Can Make or Break a Small Business
This is a contributed post and may contain affiliate links. The thoughts and ideas expressed may not be exactly what the ghostwriter Scott Sery believes. But he did read it, and signed off on it, so it’s at least pretty close.
One of the reasons that your small business is successful is because of your expertise in making your product or your service stand out. You could be excellent at advertising your product or talking about it or networking with other people in your industry, but that doesn’t mean you’re an expert at every area of your business.
You might not be an expert at some of the other important parts such as managing finances, and honestly, you don’t necessarily have to be as long as you have a good support system and a great accounting team. You don’t need to be an expert in finances, but you do need to know how to manage them, or at least know what you’re looking at if you look at the numbers. It’s all well and good to get what you need from an ATM machine, but that doesn’t mean that you know how to manage your finances in a way that maximizes your business productivity or keeps your business flowing.
Five Tips on Managing Finances
It can be a challenge, but it’s also critical to the survival of your business to learn how to do it. So here are some tips for managing your small business finances that you need to know.
- Make sure that you pay yourself. Even if your business is small or brand new, it’s very easy to forget about paying you and put all of your money into what you’re doing. This is not something that you should be forgetting. Small business owners should never overlook their own role in the company, and if you’re the one running things and at the moment spinning most of the plates by yourself, then you do deserve a salary. It’s not all about profit for the business because you still need to survive. Work out what you should be paying yourself and make sure that you pay that out of the profit.
- Learn where to invest. It’s important to put some of your business money aside and look into opportunities for growth. This is where you should collaborate with a financial manager the most. Having somebody work with you on those opportunities is important for success as a small business, but you don’t necessarily have to stay that way. If you want to continue to innovate and attract the best employees and the best work, then you need to demonstrate that you are willing to invest in your future. Customers always appreciate an increased level of service and you can offer that to them.
- Don’t be afraid to borrow. A lot of business owners are afraid to go into debt because of what it could mean for their business, but you don’t need to be afraid of it. Loans can lead to you worrying about the financial repercussions of failure, but the idea is that you can borrow so that you can have that influx of capital that you obtain from the loans. You can then use the proceeds to boost your cash flow and face fewer issues when it comes to paying your employees and your suppliers. Your business income covers the loan, and that’s exactly how it should be. But again, if you get confused, speak to somebody about this.
- Always keep good business credit. One of the most important things to know about managing your small business finances is that keeping good credit is important. As your company grows, you might want to purchase more commercial real estate or look for new insurance policies and take out more loans to facilitate these. You can only do that if your credit looks good. Poor business credit means you won’t be able to get approval for these transactions, and your acquisitions may be a lot more difficult than you think.
- Work out a great billing strategy. Every single business owner has a client that’s always late on their invoices, so you need to have a strategy in place to manage that cash flow. You can choose to have people pay upfront or pay half of the job upfront, if necessary, instead of offering something and then waiting for payment. You need to have clear terms in place and clear repercussions for missing payments as well. Too much cash that is tied up in unpaid invoices can lead to a lot of problems with your cash flow, and that’s the main cause of business failure. You do not want anybody else’s neglect to be a cause of your business to fail.
How do you manage your finances? Do you outsource the bulk of it, or keep it in house?