Financial tips to manage difficulties in a business.
1. Pay a salary to yourself
While running a small business, it can be easy to try and put everything into day-to-day operations. After all, that extra capital can often go a long way in helping the business grow. But one has to ensure that the business and personal finances are in good shape.
Here, personal finances refer to managing one’s own money, savings and investments apart from the person’s business.
2. Invest in growth
It is also very important to set aside money to look into the growth opportunities. This can allow the business to thrive and move in a healthy financial direction. Edgar Collado, the Chief Financial Officer of Tobias Financial Advisors, said business owners should always keep an eye on the future.
Small businesses that want to continue to grow, innovate and attract the best employees should demonstrate that they are willing to invest in the future. Customers and employees will appreciate the increased level of their customer service.
3. Make good use of loans
Due to the lack of capital inflow, one might face substantial challenges when trying to purchase equipment or grow the team. One can use loan proceeds to boost their cash flows and thus face fewer issues while paying employees and suppliers on time. But loans can be scary – so beware of loan sharks!
4. Maintain good business credit
With poor business credit, getting approval for transactions and acquisitions can be difficult. To keep good credit, one should pay off all the debt funding as soon as possible. One should seek funding because the process is quick and it is easily repayable.
5. Have a good billing strategy
Managing small business finances also means managing cash flow to ensure that the business is operating at a healthy level on a day-to-day basis. Too much cash tied up in unpaid invoices can lead to cash flow problems, which can lead to business failure. Many business owners have chronic late-paying customers and, for that, they should try a different approach. They can change the payment terms to 2/10 Net 30, in which, if the customer pays the invoice within 10 days, they will receive a 2% discount off the total bill. If not, the terms are full payment due in 30 days.
6. Spread out tax payments
If someone is having trouble saving for quarterly estimated tax payments, they can make it a monthly payment instead. In this way, tax payments can be treated like any other monthly operating expense.
7. Monitor your books
This is an obvious practice, but a very important one. Do your best to set aside time each day or month to review and monitor the books. It will allow you to become more familiar with the finances of your business.
8. Focus on expenditures and ROI
Measuring expenditures and regular monitoring of return on investment (ROI) help the business survive in the long run. ROI allows you to see the benefits, as well as harms, of your investment. Don’t forget that it is always important to have control over your finances when running a business.
It also allows business owners to track and analyze short and long-term projects. It helps you evaluate your business’s financial performance. Further, tracking your projects can help you analyze your finances and make quality decisions about the future of your business.
Deborah Sweeney, the CEO of MyCorporation, said that small business owners should be wary of where they spend their money. They should focus on the ROI that comes with each of their expenditures. Plus, they should be aware of how the money is spent and how investment is paying off.
9. Set up good financial habits
Every small business needs internal financial controls to help ensure its money is properly managed. Without them, your business risks employee fraud, cash flow shortages or even bankruptcy.
Technology gives small businesses the ability to connect with their customers via email, blogs, social networks and forums. No matter the size of your enterprise, high-tech has both tangible and intangible benefits that will help you make money and produce the results your customers demand.
There will always be business issues that need to be addressed today, but one needs to plan for the future when it comes to finances. Don’t forget to plan ahead so you can avoid these pitfalls and launch your startup successfully! “If you’re not looking five to ten years ahead, you are behind the competition,” said the Founder of QuickBooks specialist firm Set Free Bookkeeping, Tina Gosnold.