You can be a good business owner and effectively introduce your brand to the market. But to sustain your company or even grow it, you need to be good at financial management, as well. Otherwise, you’ll run the risk of falling into bad financial habits and harming your business. Here are some financial tips that can help grow your small business.
Separate business from personal finances
A very common mistake made by small business owners is jiving together their personal and professional income. Doing so makes it difficult to keep track of your business’ profit and monitor your company’s spending.
Ideally, you should maintain a separate bank account for your business. Having separate accounts can help you monitor profit and expenses and better reconcile your financial books. So go ahead and apply for a business bank account, add a small business credit card processing option to your shop, and funnel every sale (and withdraw every cost from) to your business account.
Set a budget
It’s not only your personal life that needs to follow a budget. Your business needs it just as much. It’s easy to keep on investing and spending on the growth of your business. But if you don’t keep track of it, you might be spending more than you’re profiting.
Set a budget for your business expenses. This will guide you through all business decisions and help you set revenue goals. If you find that your profit doesn’t match your budget, create ways to reduce costs and boost your bottom line.
Don’t lag behind your due dates
Part of good financial management is staying on top of your deadlines. There are a lot of expenses you have to make as a small business owner. These include paying for your supplies, the salary of your staff, operation costs, etc.
Make sure you’re not behind in paying for your bills. Otherwise, you’ll run the risk of improper planning and not having enough to settle your obligations. Every time you profit, immediately set aside the amount needed to pay your bills and other overhead costs. So when the due dates come, you will have no trouble making payments.
Keep track of accounts receivable
There will be instances when customers don’t pay for your products or services immediately. Whether you offer credit or not, you should be ready for late or overdue payments. The most important thing to do is to keep track of everything that is owed to you.
List them down in a notebook or create a detailed spreadsheet. Doing this will help you keep track of your accounts receivables and enable you to pursue payments.
Manage your inventory
You might be thinking, “what does managing my inventory have to do with my business finances?” Think about it. If you’re ordering too many supplies while there’s little to no demand, you’re just wasting your income on things that will be left stored in your supply room. On the other hand, if you’re not buying enough supplies to meet the demand, you’re turning down customers who are willing to pay.
There lies the importance of effective and proper inventory management. Study the relationship between supply and demand in terms of your business landscape. That will help you determine how much inventory you need to keep operations going.
Managing finances may be challenging. But it’s absolutely necessary to keep your business sustainable. Take these tips and prepare to manage your business finances better.
