In order to make a success of a small business you have to keep a tight rein on your finances. If you don’t have much experience with managing the back end of a company you will need help and guidance to make the most of the funds available to you. Here are 6 ways to manage your small business finances so you can remain on target for your commercial goals.
1.Pay Yourself a Wage
While you will make a lot of sacrifices to support the growth of your business in its early stages, one thing you can’t neglect are your own personal needs. Make sure you are paying yourself enough to survive as problems in your personal life can quickly become a distraction in the professional field. After all, you are putting in all the hard work and deserve to be paid for it. Understandably you want to reinvest as much as possible back into the business to make it a success, but that doesn’t mean having to suffer in the meantime.
2. Organize a Cash Injection
In order to balance the books, sometimes you may have to rely on an injection of cash from an external source. A small, quick loan could bring in extra money that can be used to stabilize the business. Before signing any agreements, take time to consider how much may be required and devise a clear plan on how to pay it back without jeopardizing the business at a later date. This should only be used as a short-term fix that paves the way towards long-term stability and not to paper over the cracks until the next financial emergency.
In order for your business to stay afloat you need solid cash flow management and that begins with strategic billing to avoid too much cash being tied up in unpaid invoices. There will always be one or two clients who are consistently late in paying their bills but you can incentive them to pay early, ensuring your cash flow stays at a healthy level. For example, offer a small percentage discount if the invoice is paid within 10-14 days, giving them a little push to prioritize payments to your company.
4. Good Bookkeeping
Every well-run business relies on good bookkeeping, which for small companies may be time consuming but plays an important role in organizing your finances. Set aside a specific time every day or month to review your books, even if you are paying for a bookkeeper. It ensures you have a clear understanding of the company’s financial health and can spot any irregularities, should they appear. That doesn’t simply mean spotting potential criminal activities but also identifying where money can be cut back to save the business some expenditure.
5.Organize your Taxes
There aren’t many people who enjoy paying their taxes but unfortunately there is no avoiding them and keeping on top of payments is a must. Income tax, sales tax and possibly property tax will all be due and failure to submit on time could lead to a fine – or maybe worse – being imposed by the Inland Revenue.
6. Invest in growth
Businesses that are not making plans to grow can become stagnant and eventually lose their position in the market. Budget to set aside funds that can be invested in growing the business to make the most of these opportunities when they arise. It is never worth risking the financial security of the company for the sake of expansion, but through good forward planning you can pick and choose the right moments to invest in the future of the company that will sustain its growth.