In many cases, a small business’ success is built on skills associated with making a product or providing a service, not necessarily skill in managing finances. If you don’t have much experience with handling your business’ finances, it can sometimes feel like a tedious chore, but not tending to your company’s money properly can also cause you to develop negative financial habits that could eventually harm your business.
The most important step you can take as a business owner to improve the success of your company is to educate yourself about finances. This is crucial, even if you have the budget to hire a CFO. This education includes learning how to complete accounting tasks, apply for business loans, and create financial statements as these skills will allow you to create a reliable financial future for your business.
Here are some essential tips to incorporate into your small business operations so you can stay on top of your company finances.
Don’t Forget to Pay Yourself
If you’re a small business owner, it’s easy to try to handle too many daily operations yourself. After all, when you don’t have to pay someone to perform certain duties for your business, you can save money. However, you shouldn’t forget the role you play in your own company and should compensate yourself appropriately if you take on extra work. While you may be focused on paying your employees and taking care of operating and marketing costs, you should make sure you reap the rewards of your hard work as well.
Invest in Your Growth
After you pay yourself, you should set money aside for business growth opportunities to help your company expand in the coming years. As your business grows, you should be looking toward the future and making wise investments that can give your brand a more positive reputation. Not only will setting money aside help grow your company, but investing in business improvements also attracts employees to your company and helps improve your marketing and customer service by giving you funds for new software or specialized services. Your business will be more profitable in the long run if you save some of your income and put it aside for the future.
Develop a Billing Strategy
Every company owner likely has a customer who is always late making payments or satisfying invoices, making it a little more difficult to manage cash flow. Cash flow keeps your business running smoothly on a consistent basis, so if you’re having a hard time getting your clients to pay on time, you may have to take a creative approach to billing. You can offer a discount to customers who pay their invoices within a certain time period as an incentive for on-time payment, or you can require customers to submit a down payment and render full payment within 30 or 60 days. This can make payments easier for customers and reduce your cash flow issues.
Don’t Make Tax Payments All at Once
If you find that it is difficult to save money for your quarterly tax payments, you may want to consider making monthly payments, which allows you to treat your tax payments like the rest of your monthly expenses. This will help you avoid the stress of trying to save the right amount of money for a quarterly payment.
Keep Track of Your Books
You’ve probably heard that you should monitor your books as a small business owner, but doing it can be difficult when your business is growing. To help yourself, you should set aside a time each week or month to monitor and review your books even if you have a bookkeeper to handle this task for you. This familiarizes you with your company finances and decreases the chances that people will commit financial crimes against you or your business.
Finally, make sure you’re aware of all outstanding invoices and ensure that you know how much you need to spend each day, week, or month on operations and necessary supplies for your business. Looking through your books regularly can help you avoid wasteful spending or embezzlement.