Manage Small Business Finances
Every business, small or big, is concerned about one thing: managing their finances. Proper money management is critical for survival in today’s volatile economy and growing industry competition. Small businesses, in particular, have to be extra cautious with their finances from the very start.
To be successful, small business owners must have in place a financial structure that is geared towards generating profits to keep afloat. Equipping yourself with good business finance management skills is crucial if you want to be successful. Here are five ways to manage your small business finances.
Up Your Financial Knowledge:
If you’re a first-time entrepreneur, it’s important to educate yourself about the various aspects of business finances. For starters, up your knowledge on how to read and understand financial statements if you don’t know how. Financial statements have four essential elements you must understand:
- Cash flow statement – Analyzes business operations, investments and financial in/outflow.
- Income statement – Provides information about business assets, liabilities and shareholders’ equity.
- Balance sheet – Provides insights about revenue earned within a specific period.
- Statement of shareholders’ equity – Shows the amount by which the business is financed through both common and preferred shares.
Separate Your Personal and Business Finances:
Don’t make the common mistake of mixing up your personal and business finances. According to Best.creditcard, it’s advisable to apply for a separate business credit card where you can put all business-related expenses. This plays a huge role in helping you keep track of your outlays while also keeping you in control of your business finances.
Also, consider opening a separate savings account for your business, where you can be saving a specific amount of money from every payment you get. These savings can be used to buy new equipment, pay taxes or even expand operations.
Cut Business Costs:
When starting a small business, one of the biggest challenges is trying to keep expenses in check without hampering core business operations and customer satisfaction. While there are fixed costs your business has to pay, you should be targeting variable business costs to find opportunities to make savings.
For instance, instead of investing in expensive branded software, you could opt for free, cloud-based, open-source software, which also offers the features you need. Cutting costs where you can should be part of your business plan. It’s important to do a thorough opportunity-cost analysis when it comes to managing business costs.
Monitor Your Progress and Measure Performance:
The best way to manage your business finances is knowing how your money is coming in and where it’s going, especially when large amounts are involved. You need to keep a close eye on your company’s financial performance regularly and compare the progress made with past financial statements.
Measuring your financial performance helps you project your company’s future expenses, cash flow and revenue. Being aware of the different financial aspects of your business helps you make informed decisions.
Consider Cloud-Based Accounting Software:
There is no better way to manage your small business finances than having the right tools to make your work easier. Instead of going for the regular accounting software, get a cloud-based accounting software that will offer you more features and the convenience you need when managing your finances.
With real-time insights and the ability to store, track, update and access data from anywhere, at any time, cloud-based accounting software is a must-have for small businesses that want an error-free, dependable and hassle-free way to manage their finances.
The Bottom Line:
Up to 70% of small businesses fail within the first five years. This is largely due to financial problems. Managing finances is one of the core aspects of running a business and with these tips to help you take the right steps, you should be in a good position to better manage your business finances.