Smart Practices: Small Business Money Management
One would assume that running a small business would be simple. Spend money where it is needed and avoid taking risks. But this is not how business works. There are so many avenues and investment areas that your revenue can be utilized to help your business. Plus, when you are still a small enterprise, and in the process of growing, it can be overwhelming to decide which specific avenue is the best choice for your growth goals.
Mismanagement of cash flow will occur. That is a learning opportunity. As long as you take the lesson of that moment and channel it into better budgeting, set realistic goals, begin tracking expenses, and track income, you will have gained more than you lost. This will help you to know what is worth spending on. Training staff is a good investment for a company that relies on customer interaction. Highly engineered dissolution testing equipment is a worthy investment for a company that wants to make a foothold in the drug testing industry.
Understanding the specific needs of your business is what will help you make the right investments in the right areas. Even in more general business goals such as marketing, you need to narrow your focus. There are many avenues for marketing and advertising. But if you advertise on billboards while your main target demographic gets its information from social media, your investment is wasted. Thus, money management is about understanding how to and how not to spend revenue.
Pay on Time
Every business has bills to pay, and meeting those payment deadlines is essential. Accounts payable and business loan payments are not payments you can afford to miss. It looks terrible to the bank when you cannot pay these necessary base-level payments on time. It will severely affect your credit rating and standing with the bank if you ever need to extend a line of credit with them.
Late fees incurred from late payments become an extra expense that you do not need and could have avoided. Set up automatic deductions where possible and set up reminders to ensure that you maintain a consistent payment schedule.
Keeping Track of Money Spent
Your business needs to spend money to make money. But do you know where this money goes? Track your business’s daily, weekly, and monthly expenses to ensure that the money is not being spent gratuitously.
This is especially important when you have multiple business accounts as you need to ensure that the income is not being negated by what is being spent. The way you spend money out of a checking account is different from how you spend money out of a credit card account. Tracking your expenses will ensure that your employees know how to direct funds appropriately.
If this sounds complicated, then you should invest in an accountant. Hiring an accountant dedicated to your business is better than contracting with an accounting firm. An outside firm will not be able to give the kind of in-depth financial advice that an in-house accountant will be able to supply you. A good accountant doesn’t just manage your books and keep you safe from overdrafts and overdrawn accounts. They can advise you on the best avenues to direct your investments and give you different levels of options before making purchases.
Online Payment Portal
One of the best investments a small business can make today is to put an online payment portal in place. This will give clients the option to pay for services and products in part or full before receipt. It will reduce the amount of time you and your employees will need to balance accounts and get bills paid on time.
These online payment portals offer multiple avenues of payment, and the clients will find it easier to pay online than come into the office in person. Consider making the online portal more desirable to clients by offering upgrades, coupons, or rebates to clients who pay in full. This will encourage them to make use of it more often, and your business will benefit.
Paying online will require customers to identify the service/product they want and give details about their specific needs. Your employees can prepare the service/product to the client’s exact needs before they arrive for collection. This will save additional money in terms of wait time, serving time, and preparation.
One rather obvious area to make smarter financial choices is when it comes to the funds that support your business. As the business owner, you may feel that you need to keep your personal funds connected to your business funds because you want your business to have a safety net. But you need to separate the two as soon as possible.
Keeping your personal funds connected to business expenses makes you liable in the event of an unexpected lawsuit. Your personal assets could be frozen, and your options will become limited when seeing redress. Separating the funds also allows you to evaluate whether the business is approaching viability or if you need to change tactics. Separating your business from an emotional attachment and seeking to treat it like a major investment will help you run it better.