Are you a small business owner? If so, you’re probably a visionary, a creative, and/or a subject matter expert. What you may not be is a financial wizard. We’re here to help with that. Here are 10 tried-and-true tips for managing your small business finances. Follow these principles and you’re well on your way to business—and financial—success.
1. Pay yourself
It may be tempting to skimp on your own salary in exchange for building up your operations and business growth. Or you may want to cut back on your own wages in order to pay your employees more. Don’t do it! If your personal finances suffer, so will your business. And if the business ends up not working out, you won’t have any money to fall back again.
2. Spend on your business
It’s easy for business owners to get tunnel vision, but thinking about the future of your company is crucial. Set aside some money from your profits to put back into your business: whether that means hiring more employees, raising the wages of your current employees, renovating your storefront, beefing up your marketing efforts, or making other improvements.
3. Don’t shy away from loans
You may feel nervous about taking out a loan, but without that added capital, you may never be able to grow and level up your business. Plus, those loans can improve your cash flow and make it easier to pay your suppliers and employees. Just look for a loan with good terms and an affordable rate.
4. Keep your credit score high
Having a good credit score is essential if you want to expand your business. Pay off your debts ASAP, and don’t leave a balance on your business credit cards for longer than a few weeks at a time. Avoid loans that carry interest rates you won’t be able to afford, and only get funding you can quickly pay back.
5. Have a strong billing game
If you run a business that involves sending out bills and invoices, know that you’re always going to have one or more clients who don’t pay you on time ever. That’s why managing small business finances includes managing your cash flow—and coming up with creative solutions to get people to pay you. Sending automated reminders and giving discounts for early payments can help.
6. Space out your tax payments
If paying a large chunk of taxes each quarter is too much of a hardship on your cash flow, you may prefer paying taxes by the month instead. That way, they simply become another monthly operating expense.
7. Keep an eye on your books
Each day, week, or month, you’ll want to set aside some time to review your books. Yes, even if you have a bookkeeper. This lets you become familiar with the way your business operates, helps you avoid wasteful spending, and ensures you’ll be better prepared to catch any financial crimes that may happen. After all, if you never look at the books, there’s nothing to prevent anyone from embezzling.
8. Focus on expenditures and ROI
Measured together, expenditures and ROI (return on investment) paint a clearer picture of the effect of your business spending than almost anything else. This will allow you to figure out which business expenses are helping you and which are hurting you.
9. Set up financial protocols
It’s easy to neglect your business’ finances, which is why setting a regular time to review and update financial info can be so helpful. Even when you’re strapped for time or money, making time to go over your finances, and make sure you’re following all relevant financial business laws is important. This is especially true if you have employees, as you’re setting the standard for them.
10. Plan for the future
There are always a million and one things for the small business owner to do, so thinking about your business’ future may feel overwhelming. But having a plan for the next 5 or 10 years will help you a lot—and keep you ahead of the competition.