Excited to have launched your new business? These money management strategies would help you save money on all fronts.
If you are a small business owner, you probably know that the key to your success is not just driven by the number of customer transactions, but also the way you manage your money.
Being a small business owner is all about following your dreams and calling your own shots. But it’s also about managing your money responsibly and keeping a tight grip on your finances.
Why Should I care?
Any seasoned business owner would tell you that the first few years for any new business are crucial to its long-term success, with many challenges to overcome and lessons to be learned.
One such problem is the problem of cash flow problem and mismanaged finances. Some companies fail to plan properly, some set their sights too high or low, some don’t keep track of costs, some fail to chase payment. And we all know that failing to plan ultimately leads to planning to fail.
“Failing to plan is planning to fail.” — Benjamin Franklin
In order to not only survive but thrive as well, it’s important that you learn the best ways to cut down on your costs while still providing the same level of quality.
All of this may sound complicated and overwhelming, but if you stick around till the end, you will with some of the best financial best practices to implement.
So without further ado, let’s get started:
1. Create a budget and stick to it
Many small business owners are doomed to fail because they make the skip budgeting. One of the biggest known reason for is the fact that it’s difficult to estimate what you’ll spend when you’re new in business and don’t have prior period numbers to use as a starting point.
But make no mistake, creating a budget is the first place to step in managing your business finances.
A budget is the blueprint using which a business owner can create a beautiful building with a strong foundation.
But what happens if your numbers aren’t spot on? Don’t sweat it! It’s perfectly fine since even established businesses see variances.
The process of creating a budget will make you more thoughtful about how you’re spending your revenues and what you can do to improve.
Once you’ve created a rough budget, evaluate how your actual numbers compare to your budget estimates on a timely basis. Over the course of time, your budgets will be more accurate and you will be able to efficiently manage your money.
2. Get Your Cash Flow Organized
When you’re getting your business started, keep track of all income and expenses from day one — even if most of your numbers are zero.
It’s easy to let managing your business finances fall behind when you’re focused on the million other things you need to do to get your business off the ground. But staying on top of your accounting is incredibly important.
You’ll be thankful you took the time to set up your finances and get organized at tax time and when your business grows to the point you need to hand the daily accounting tasks off to someone else.
How to put it into action you ask? It’s really simple — invest in a cloud-based accounting software.
While small business owners in your community could have started out with a simple spreadsheet for tracking income and expenses, online accounting software would end up paying for itself when you consider the time that is saved from automating invoices, filing tax returns without hassles and staying top of the finances.
3. Set SMART Goals
Ambition and enthusiasm are important characteristics of business owners and managers. But so is the ability to make rational financial decisions based on the facts.
One of the reasons why so many businesses fail to thrive is the fact that their owners give in to the enthusiasm but fail to create a proper short-term and long-term goal that is realistic and achievable.
In fact, the short-term goals for every small business owner should be SMART:
This means using the budgeting data we mentioned above to set financial goals specific to the business and its needs.
Once a goal is in place, you as a business owner would be able to easily identify wasteful spending and conclusively plan for ways to trim the costs to increase your profit margins.
4. Create and Review Your Financial Reports Regularly
It’s important to keep a close eye on your business expenditure. An online accounting software will automatically quickly draw up useful reports, such as:
- Profit and loss reports: This report will show your company’s income, expenses, and profits and losses over time.
- Balance sheet reports These show assets, liabilities, and net equities.
- Receivables and Payable Report: These show how much money is owed by and to, your company.
These reports give an insight into the financial health of a business empowering business owners to create effective buying, selling and collection strategy.
(If you want to read more about financial reporting, its importance and how you can make the best out of them, you can read it here!)
Business might be about creating great products and services. But if you can’t pay your bills, you could be out of business.
Failing to understand your numbers is the number one reason for a business to go bankrupt. So it’s important that you manage your money wisely, and build a healthy business that benefits your customers, employees, and more importantly ‘You’.
Are you a business owner using one of these money management tactics? If so, comment below and let us know.