Managing your business finances are key to success. Below are a few tips to help you, as a small business owner, efficiently manage your finances.
Invest in Growth
It is wise to set aside money for growth opportunities that allow your business to grow, be innovative and thrive. Growth is essential to the longevity of a business as it helps obtain assets, fund investments and attract new talents. Growth is what drives business performance and profit.
Ask About Loans
Loans allow you to obtain an influx of capital and without it, you may face challenges when trying to purchase big-ticket items such as equipment or buildings. Loans also increase your cash flow which helps ensure your payroll and accounts payables. Only seek funding that you can quickly and easily repay with rates you can comfortably afford.
Maintain Good Business Credit
Poor business credit can hinder your ability to qualify for business loans for things such as commercial real estate. To ensure good business credit, be sure to pay off all debts as soon as possible. Do not allow business credit cards to run a balance for any longer than a few weeks.
Create a Billing Strategy
If you find that you're struggling to collect payment from clients, it may be time to create a billing strategy. Every business owner has/had a client that is consistently late on invoices/payments. Too much cash tied up in unpaid invoices can lead to cash flow issues which is a leading cause of business failure. Try changing payment terms to '2/10 Net 30', meaning if the client pays within 10 days, they receive a 2% discount; If not, full payment is due in 30 days.
Spread Out Your Tax Payments
Estimated quarterly tax payments can seem intimidating to many business owners. To ease the financial strain, choose to break the payments into smaller monthly payments vs larger quarterly payments. Treat this as any other monthly operating expense.
Keep Accurate Books
Keeping and monitoring accurate books is critical. Keep track of ALL business expenses and income. Set aside time each month to review and monitor your books with your bookkeeper. Failing to do so opens the door to wasteful spending or worse.
Focus on Your ROI
For a clear picture of which investments make the most sense for your business, you need to measure expenditures and return on investment (ROI). Focus on the return that comes with each of your expenditures. Measuring your expenditures and ROI allows you to easily manage & track your investments. When you find one isn't paying off, cut back and allocate more money on the investments and initiatives that do.
Planning ahead is key to a business' financial success. There will always be business issued to deal with today, but when it comes to your business' finances, you must plan for the future. As said by Tina Gosnold, founder of QB specialist firm Set Free Bookkeeping, "If you're not looking five to ten years ahead, you are behind in the competition."