As good financial management skills serve as a blueprint for success, bad money management habits may force you into bigger money conflicts in the future.
If you’re a small business owner and looking to make your company grow, one of the most important things you can do is to develop the right core money management skills. As practice makes permanent, it’s essential to manage your business with the ‘good skills’ early on.
Whether you’ve always been financially savvy or you’ve experienced taking a personal loan with fair credit, you’ll surely benefit from these financial management tips.
1. Mind Your Deadlines
Just as you’re conscious of your personal credit card bills or loan payments, you have to be diligent in paying your business-related bills on time. From tax payments to utility bills (and other expenses in between), set-up payment reminders in your calendar so you won’t miss anything.
When left unchecked, these late penalties can snowball easily and put your business into debt. For small businesses with a limited working budget, every penny counts. By staying on top of your bills, you can save potentially hundreds (to thousands) of dollars that you can invest in things that can help your company grow.
2. Segregate Your Business and Personal Finances
Many small business owners are often guilty of meshing their personal finances with their business finances. While you may have only the best intentions in using your personal money to fund your business, this can complicate things in the future.
Even if business and personal finance segregation isn’t required, having separate bank accounts and books will help you monitor your cash flow better.
Have a clear separation between your personal and business finances, set different budgets for each and stick to them.
3. Be Diligent in Monitoring Your Books
Although you’re working with a bookkeeper and accountant, you should be keeping track of your expenses (and account receivables) and monitoring your books on a regular basis. Doing regular checks is an opportunity to get a good handle of your finances and spot possible discrepancies in your numbers.
4. Make Smarter Budget Choices for Your Business
Making smarter choices for your business covers several things, from creating a budget to learning to negotiate:
- Create a budget and stick to it. It’s easier to keep track of your business expenses when you have a budget to work with. Budgets will help you identify where your money goes and will help you assess whether you’re spending too much (or too little) on key aspects of your company.
- Time your expenses. It’s normal to invest in equipment, materials or training for your company, but don’t try to do everything all at once. Time your expenses to make sure your purchases won’t hurl you into debt.
- Frugality is key. Not to an extreme measure, but try to cut costs in every opportunity you can. For instance, you can find a way to negotiate with your vendors to get a better deal (or discounts) before finalizing a contract. Another way is to identify which strategies are eating up your finances but yielding zero (or poor) results and cut back on these expenses.
- Have a cash reserve ready. One of the reasons to remain frugal as a small business owner is to make sure you have a ‘cash reserve’ for your business. This is to help you compensate for unexpected financial turns in your business, without the need to take a personal loan with fair credit (or regardless of your credit score).
5. Compensate Yourself Accordingly
It’s common for small business owners to focus their finances on funding their operations and neglect paying themselves. However, experts frown upon the practice. As an owner, you have to recognize your role in the company and compensate yourself for the work you do as well.
6. Invest in Growth Opportunities
Find ways to grow and don’t be afraid to set aside a budget for these opportunities. Whether it’s adopting new software or a new sales strategy, invest in knowledge and resources that can help your company grow sustainably in the future.
7. Plan for Your Future
While it’s easy to get lost in the day-to-day operations, remember why you’ve started your business in the first place. Surely, it’s not just to pay the bills! If you haven’t yet, sit down and list your goals and your vision for expansion.
Keep a list of short-term and long-term financial goals for your company and make plans on how to achieve them.
Key to Success: Practice Good Financial Management Skills
As practice makes permanent (not perfect!), religiously implementing the right financial moves in your small business will help you form good habits that can help your company operate sustainably in the future. Like building your house on a strong foundation, practicing the basics of financial management will keep your business well-grounded and well-prepared for success.