Running a small business implies performing a variety of tasks, from planning and developing products/services to building marketing strategies or managing employees. But it can’t be denied that the success of any business venture is closely linked to proper money management.
While some entrepreneurs have the necessary training, knowledge and experience to stay on top of their business finances, others may find it difficult to wrap their heads around financial management activities. If you fall in the second category, this guide is for you.
Managing business finances can feel like a daunting task indeed, especially for small business owners who wear many different hats and already have tons of other responsibilities to handle. However, without effective financial management, your small enterprise is bound to fail.
So, if you want to navigate the intricate world of business finances like a pro and grow your small business, here are a few tips you should take into account.
Set clear boundaries
As a small business owner, your personal and professional life can often converge. This is more likely to happen when you run a business from home or when your friends or family members are also your employees.
However, if boundaries are a little blurry in your day-to-day interactions, you should make sure that the same thing doesn’t happen when it comes to financial aspects. You must have a clear separation between business and personal finances. Otherwise, things can get pretty chaotic in this department, to the point where it’s going to be impossible for you to make sense of what’s going on. Apart from making it easier for you to organize your bookkeeping and financial tasks, this will also help you avoid legal issues, protecting your personal assets.
Educate yourself on business accounting matters
If you’re not financially savvy, the next aspect you should focus on is getting educated on business finance matters. Even if you’re going to delegate all accounting-related tasks to your employees, it’s still important to understand the basics if you want to make sound business decisions.
As experts at QuickBooks explain, staying up-to-date with all of HMRC’s changes and using the right tax codes is important if you want to make sure you’re paying your employees correctly. Apart from that, brushing up on your accounting skills will help you understand how business finances work, so you can avoid making costly mistakes. For starters, you should try to familiarize yourself with key business accounting terms, then you can move on to more complex matters such as cash flow management and proper record keeping. There are plenty of online resources, such as guides or online classes, that can help you in this respect.
Get professional help
If the burden of managing your business finances is too heavy for you to handle on your own, getting professional help is your safest bet. The support and guidance that a skilled accountant can provide are truly invaluable, especially if you’re at the beginning of your entrepreneurial journey and you lack experience in this area.
However, it can be difficult to find a good accountant if you don’t know where to look for. You can start by asking for referrals from other business owners, as they are in the best position to advise you. Make sure you check certifications and experience when you assess potential candidates. And most importantly, look for an accountant with expertise in your industry.
Use the right tools
Financial management for a small business can turn into a tedious and cumbersome activity if you rely on outdated methods. You’ll lose a lot of valuable time and resources if you choose to handle all accounting tasks manually. Besides, this approach leaves a lot of room for mistakes, which can spell disaster for a small business.
Luckily, things have evolved in the financial sphere are now business owners can use all sorts of apps and tech tools that can help them handle all the accounting tasks that were once performed manually. There are many benefits to using software for accounting. Apart from helping you save time and money and providing easy access to accounting data, these tools also ensure easier collaboration, promote data accuracy, and offer you valuable insight into your business.
Manage business credit score
Most small businesses will need financial support at one point or another, whether to improve business operations and expand their products/services or to overcome a rough patch.
You might want to lease equipment, get a business credit card or take out a small business loan. If you find yourself in such a situation, you’ll need access to credit. Keep in mind that your financial options will be directly influenced by your business credit rating and history, and these aspects are closely linked to the financial management of your business. As such, you have to focus on building your business credit score if you want to ensure eligibility for the financial services we mentioned.
Monitor business performance
As a business owner, you must know where your money comes from and where they’re going at all times. It’s important to know exactly how you’re spending your money if you want to improve your financial planning and identify where your financial holes are.
That can only be achieved by closely monitoring business performance. Keep a close eye on your business financial records and try to identify patterns or trends. The insights you get from assessing your past and current business performance will guide your future financial decisions.
Out of all the tasks that one has to handle as an entrepreneur, managing business finances is probably one of the most daunting ones, even for those with extensive experience in the field. However, as with all things in life, perseverance and continuous learning can help a lot in this respect. You might not become a financial expert overnight, but improving your money management skills will definitely help you grow your small business.