6 Expert Tips for Managing Small Business Finances

Every business, no matter how large or small, relies on sound financial management. Even viable and potentially successful businesses will collapse without it.

Often, the abilities you bring to manufacturing your product or performing your service are the reason your small business is successful. If you don't have a lot of expertise managing business finances, it might feel like a hassle, and you may fall into terrible financial habits that will affect your company in the future.

Key takeaways:

• Proper financial management stabilizes your business and reduces the likelihood of failure.

• To manage your company's finances, make sure to pay yourself, maintain good credit, keep track of your books, and plan ahead.

• Debt finance for small businesses includes interest fees in addition to repayments, whereas equity investment does not include interest but may provide you less control over your company's activities.

What Is The Importance of Managing Your Small Business Finances?

The first crucial step every business owner can take is to educate themselves. Understanding the fundamental skills required to run a small business — such as performing simple accounting chores, applying for a loan, or producing financial statements – allows business owners to create a solid financial future. Staying organized, in addition to education, is an important component of good financial management.

Expert Tips for Managing Your Finances as a Small Business Owner

Here are a few things you should do as a small business owner to keep your finances in order.

1. Financial statements

Financial statements are the foundation for managing your finances. It governs your company's finances by presenting a breakdown of everything related to expenses that you have done, whether in profit or loss. It assists you in keeping track of your capital and expenditures, as well as offering a cash flow estimate for future use.

Even if you have a bookkeeper, you must do your best to set out a particular time every day or month to analyze and manage your books. This will enable you to be more aware about your

company's finances, as well as give you a window into potential financial scandals in your company.

2. Remember: loans are your friend!

Loans can be frightening. They can cause anxiety about the financial consequences of failure. However, without the influx of funds provided by loans, you may encounter significant obstacles when attempting to purchase equipment or expand your workforce. You can also use loan proceeds to increase your cash flow, allowing you to pay staff and suppliers on time.

3. Cost benefit analysis (CBA)

A close examination of your company's money-in and money-out activities allows you to maintain a healthy profit-loss balance. It is critical to categorize expenditures in your balance sheet, from development and projects to relevant and non-revenant charges. Then, using a cost-benefit analysis, you can put potential recurring benefits and cost savings into context.

Organizing internal financial strategy, even if it's as simple as devoting time to reviewing and updating financial data, will go a long way toward protecting your company's financial health. Keeping a solid foundation of financial checks in place will help you reduce your risk of fraud.

As a small business owner, you are frequently constrained by time, money, and generally insufficient technological capabilities; but, this should not stop any small business owner from implementing some form of internal control.

This is especially important if you have a large number of employees. Soft internal monitoring has the potential to lead to employee extortion or theft, depending on the situation, and can invariably land you in trouble with the law if you or a worker of yours fails to follow specifically defined laws.

4. Develop an effective billing strategy

Every business owner has a client who is perpetually late with their bills and payments. Managing small business finances also include managing cash flow to ensure that your company operates at a healthy level on a daily basis. If you're having trouble collecting from a specific customer or client, it might be time to get creative with how you bill them.

ALT: Create billing strategy to avoid late payments.

5. Maintain solid business credit

As your business expands, you may wish to purchase more commercial real estate, obtain additional insurance policies and additional loans to help all of these endeavors. With weak business credit, it may be more difficult to obtain clearance for all of these transactions and acquisitions.

Pay off all of your debt funding as quickly as possible to maintain good credit. For example, don't carry a balance on your company credit cards for more than a few weeks. Similarly, do not take out loans with interest rates you cannot afford. Only seek cash that you will be able to return swiftly and easily.

6. Recognize when to seek professional assistance

Unfortunately, stubbornness is a trait shared by many entrepreneurs. It's a useful attribute to have in various situations. Stubbornness can help you stick to your guns and construct the vision you've always wanted, but it can also have its drawbacks.

When dealing with accounting and finance challenges, it might be difficult to let go and not just need the help of others, but also to confess failure. However, it is occasionally important for a company's existence to bite the bullet and hire a professional, such as a certified public accountant.

But when should you make that critical decision? Here are some instances of situations in which assistance is advised:

• You've lost track of your numbers.

• You're going to be audited.

• Account administration consumes far too much of your time.

• You continue to make errors.

• You're expanding at a quick pace.

Simply put, you're out of your element.

Related: 8 Signs It’s Time to Get Accounting Help for Your Online Business

Seek A Professional to Manage Your Small Business Finances

Don't allow your business to fail because your money is mismanaged. The basic rule of accounting: You can't always be your own accountant. In order to run a successful business, you'll need to hire someone to help you handle your business finances..

Today CFO will provide more tailored assistance to your specific business accounting needs. Our CPAs are experienced in working with small business owners from different industries. Give us a message today!