Owning a small business comes with a slew of fun and satisfying personal milestones. Following your passion and being your own boss are typically top two. However, owning your own business also brings the back-office business responsibilities that never cross your mind at the start and do not typically fall in the fun-bucket as they are time consuming and at times difficult. Topping the list of necessary evils that come along with owning a business is proper financial management.
Small businesses need to exercise caution with their financial decisions from the very beginning. Managing a successful business takes more than just a good idea. Every business needs a financial structure that generates a profit to keep the business sound. Although it may appear to be, and often is a tedious task, owners need is to be equipped with good money management abilities to turn their venture into a success story.
Quality financial management offers many benefits to you as a business owner. Financial management includes bookkeeping, projections, financial statements, and financing, which forms the foundation for reaching business goals through sound business decisions.
As a business owner, financial management is one of your main avenues to success. It is the way you know if you are making a profit and helps you decide what you can afford in terms of store or office location, inventory purchases, employees, and equipment. Owners need sound financial information to set prices and select vendors. Financial management provides the tools to plan for overall business growth, for diversification of product lines, or for reaching new customers and markets. Financial management helps you decide which products, services, and markets are profitable. Effective financial management gives you tools to chart your course into the future, adjust your direction when needed, and help you find your way through challenging times.
However, not all business owners are adept at handling finances. Here are some basic tips for getting your small business finances in order:
- Personal and Business Boundaries: A properly run business has boundaries. There should be a strong boundary between your personal finances and business accounts. By keeping separate bank and credit card accounts for business and personal, you’ll save yourself hours of work and make it easy to keep track of deductible expenses in one place.
- Be Financially Proactive: Yes, accounting for your small business takes time away from your work. However, keeping your business finances in order will save you a lot of headaches, time, energy and money. Allocating 15 minutes each week to spend quality time with your business finances will save you time in the future and allow you to be financially prepared.
- Track Invoices and Payments: If you’re not keeping proper records of your invoices and payments it can very easily snowball into late or missing payments. It is vital to ensure you’re properly tracking all payments due and recording when each invoice is paid, how long customers generally take to pay, and which customers you’ve had difficulties collecting payments.
- Trust A Professional: Accountants should be viewed as trusted and respected allies to small business owners. This is not an area to cut costs. However tempting it may be to save some money and do it yourself, an accountants intimate knowledge of tax laws along with their ability to identify deductions and keep you penalty-free are invaluable.
- Invest in Tools / Software: There are a lot of tools available to help you better understand your business finances. The key is to find a solution that best fits your needs. Tools range from a simple Excel spreadsheet to DIY software such as Quickbooks or Freshbooks. The goal is to be able to collect data on your finances so you can monitor funds, forecast for the future and budget appropriately.