5 Finance Tips for Managing Your Small Business

Monday, August 27, 2018, 6:00 PM | Leave Comment

To be successful, a small business owner has to understand business finances and business management. But for many, managing business finances is the most difficult part of running a business.

It’s not easy, especially if, like most small business owners, the expertise you bring to your business has more to do with creating the products and services you provide than tackling basic accounting.

But don’t fret. Business finances are something you can learn, and if you want your business to survive and thrive long-term, you’ll commit to doing so.

Some of what it takes to manage a business’s finances involves understanding the ebbs and flows of your industry, but there’s also common-sense stuff like keeping personal expenses separate, doing your books regularly and being shrewd in how you use your money.

With a little financial savvy and a little good fortune, you can make the most of your business dollars, while still finding enough to pay you and your employees the salaries you deserve.

    5 Finance Tips for Managing Your Small Business

  1. Understand Your Cash Flow and Sales Cycles

    Most businesses go through cash flow and sales cycles. Depending on your industry, you may see changes in cash flow depending on the time of year, the time of the month or even the time of day.

    Just like coffee shops get busy in the morning and restaurants get busy around lunch and dinner, other types of businesses have more or fewer customers depending on cyclical flows created by consumer demand.

    Running an accounting firm, for example? Expect to be extremely busy during tax season and less busy the rest of the year. Opening a ski shop? Have a plan to get your business through the summer months.

    Sales cycles also affect your cash flow. The sales cycle begins with prospecting for leads and ends with closing the deal and exchanging goods or services for cash.

    Some businesses, like restaurants or retail stores, have fast sales cycles: The customer takes an interest and purchases the product right away. Other businesses, however, need to work with customers for much longer, sometimes months, to complete the sales cycle.

    The faster your business’s sales cycle, the less of a financial cushion your business will need because a faster sales cycle means revenue will be coming in more consistently.

  2. Keep Business and Personal Expenses Separate

    When you start mixing business and personal expenses, problems can crop up.

    Whether those problems include confusing, unclear or incomplete accounting records, tax issues or issues of personal liability, you want to avoid them.

    It can be tempting to use personal money to fund your business, especially when things get tight. Don’t give in. Set a personal budget and a business budget and don’t cross the streams.

  3. Negotiate With Vendors

    One of the advantages of getting an MBA before you start your small business is that you’ll build the negotiation skills you need to get the best price from vendors.

    You’ll also have a more comprehensive knowledge of your industry and you’ll be better able to understand contract terms. Not only that, you’ll be able to weigh the benefits of, say, an extra 30 days grace period to pay against a five percent discount up front, and decide which one is really going to save you the most money.

    Never take a vendor’s first offer; always try to negotiate for a discount. You might not always get one, but it’ll be worth it when you do.

  4. 5 Finance Tips for Managing Your Small Business 2

  5. Budget for Growth

    You need to pay yourself a salary out of your business’s revenue as well as paying your employees, but you should also set aside some portion of the money your business makes to invest back into the business.

    Stay on the lookout for opportunities to grow the business, whether that’s investing in new equipment, adding a new product or service, opening a second location or funding professional development for employees.

    Investing in your business will help you improve your customer service and attract better employees.

  6. Stay on Top of the Books

    Make time to do your books regularly; the last thing your accountant wants is to see you walking in at tax time with a shoebox full of jumbled receipts and a wad of bank statements clutched in your fist.

    Set aside some time each month to review your books, reconcile your bank statements, and take stock of outstanding invoices. This will keep you financially in-tune with your business. It can also help you protect your business from embezzlement and other financial crimes. Not to mention, it makes your accountant’s life easier.

Managing your small business finances can seem like a daunting task, but it doesn’t have to be. Stay on top of your books, manage your business’s funds wisely, and always look for a better deal. Before you know it, your business will be thriving, and you’ll be looking for more and more ways to invest your profits to grow your business even more.

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