Financial Management Tips for Small Businesses
Running a small business is a lot of fun, especially if you love what you do. It’s safe to say that as the owner of your company you’re probably going to enjoy what you do as you’re the one that set it up. For this reason, you’re going to want to do everything in your power to ensure that it’s a success and nothing goes wrong. Being financially responsible is the best way to do this because without money there would be no business at all.
Keeping on top of your finances and understanding where your money is going is essential for a successful small business so here are some financial management tips.
Planning
When you set the business up it’s safe to say you had a plan to work, and if you didn’t then you’re in a lucky situation where you managed to get the company off the ground. Everything starts with a plan and it’s no different when it comes to money. In the beginning, you should have a setup budget which states what money is needed and where it is going to go every step of the way. Moving forward you should plan a budget for your business and allocate costs to each department, it may look small to begin with but if you can stick to them you’re going to evolve quicker than you think.
Accounting Software
Looking back into the past, accounting was a nightmare for any business owner, and even if they owned a small business of 20 employees, at least 3 hours a day was spent completing paperwork. Due to the sheer number of tasks a small business owner needs to complete in a day, taking that much time out for admin was a real pain. Luckily, we now live in a time in which technology is developing at such a rapid rate that we have artificial intelligence and other amazing software to complete this for us. Having said that, it’s still important to have an accountant and not rely solely on a computer as using AI is still largely under tested and lacks certain aspects a human has. In most cases, it’s going to be beneficial, especially when completing admin tasks, but it’s not going to have the ability to explain what it’s doing or give you true analysis for future planning.
Invest
Keeping an eye on the future is essential for growing your small business into something more lucrative. Investing at the beginning and putting some money aside where you can, will help you in the long run and allow you to evolve as and when you want too. Growing companies attract the best staff as you’re displaying signs of a good developing business, something that all hungry employees want. Not only this but if you want your business to make some serious money then you’re going to have to spend money to make it, it’s a cliche saying but something every business owner should remember.
Build Your Credit
If you work and live on planet earth then you’ve heard of a credit rating, a numbered score in which loan companies and lenders see how ‘financially healthy’ you are and what the risk is going to be if they lend to you. Well, it’s not only individuals that have a credit score but also businesses and in order to get the best chance of decent loans and raising capital then you need a good score. Start small but my advice would be to start at the beginning when you set your company up. The longer you have gaining a good credit score the more likely you’ll be accepted for loans when you need them.
Accept Credit When You Need It
Many small businesses make the mistake of accepting any form of capital they can when offered by an investor. Whilst this can be handy when trying to pay a few bills it’s not the way forward. You should always have a plan of what you are going to use the money for before accepting it, otherwise, you spend it on the day-to-day bills and won’t be able to use it wisely.
Running a small business is difficult, especially if it’s just yourself at the beginning. Remember that you’re a valued part and the driving force behind that company growing so never forget to pay yourself, you’re an important factor too. Be sensible with your money and don’t invest in anything you don’t need, there are enough hidden costs across the board without you adding to it. Build your credit and use it wisely, grow organically and look after your staff.
