Whether you are a small business owner or a large conglomerate, properly managing your finances is a must for any healthy business. Having full control of your finances prepares your business to stay afloat during bad times and propel it forward during the good times. You should familiarize yourself with the following proven financial tips for small business owners that can help you to be more successful in your business.
Set a BudgetBudgeting allows you to stay goal-focused. It lets you know how much you can spend, your exact spending, and on what items. Setting a realistic budget allows you to cut down on unnecessary expenses and estimate what your profit will be at the end of each period. Before setting your budget, it’s important to familiarize yourself with certain financials from your business such as:
- Estimated revenue from your business
- Fixed, variable, and one-off costs
- Cash flow projections
Keep Personal and Business Finances SeparateAs a rule of thumb, never mix your personal finances with business funds. Mingling the two can mean you may not be able to differentiate the business assets from personal ones and find it harder to reconcile the financial records. You’ll also lose the liability protection afforded by an LLC if you commingle business and personal transactions. Always have a separate bank account for your business. If you don’t know where to get started with selecting a bank, we’ve created a round-up of all the factors you should consider prior to picking who you should consider for your bank accounts.
Analyze Your Cash FlowAlways keep track of how much money is going in and out of your business at all times. This allows you to plan in advance. By planning in advance, you’ll be able to create a better budget for things such as new raw materials, employee wages, or to build a cash reserve for a rainy day. Most business owners claim that their business struggles with cash flow. In most cases, the root of cash flow problems begins with not properly forecasting or projecting the cash going in and out of your business. If you find yourself struggling to manage your cash flow month after month, it may be time to consider accounting software. Using software such as FINSYNC will help you stay on top of your finances. With FINSYNC’s cash flow management solution you’ll be able to:
- Connect all bank accounts and credit card accounts in one place
- Have all payments in and out on the same platform
- View a calendar view of every payment coming in or going out
Don’t Be Afraid to Seek Professional HelpOften, small business owners struggle to keep up with accounting and bookkeeping requirements. They either end up spending more than needed or neglecting it due to time constraints. If you find yourself feeling overwhelmed, it may be time to consider hiring a qualified professional to do the heavy-lifting for you. Remember to revisit these financial tips to take your business to the next level.
Running a small business can be one of the most exciting things you do. With all the freedom a small business provides, successfully managing both expectations and most importantly, finances can really keep you on the right track. Here are a few tips to leverage when managing your small business finances.
Separate Your Personal Finances From Your Business FinancesIt is important to know that blurring the lines between personal and business is never a good idea. Your company is its own independent entity. Keeping your personal finances separated from your business will not only reduce problems in the long term but also make it easier to manage and keep track of your finances. One of the main reasons you should separate your business from personal finances is for tax purposes. The IRS allows business owners to claim deductions for business-related expenses. In order to successfully claim deductions, you must provide clear documentation that indeed the expenses were indeed business-related. Using your personal bank account to pay bills can be very risky. Instead, you can transfer money into an account in the name of your business as needed, which is called capitalizing your business. If there is no clear distinction between you and your business, creditors are able to claim your personal assets in order to satisfy a debt so consider opening a business bank account ASAP if you haven’t done so already
Use a Business Credit CardOpening and making regular payments on a business credit card can help begin to build your business credit. Having a good credit score affects your business’ ability to qualify for increased credit lines, loans, office leases, equipment, and better terms from vendors. In addition, business credit also impacts your business insurance cost. While there are a multitude of credit cards for which you can apply, we recommend reading our latest blog post to find the best business credit cards for your particular situation.
Pay Bills on TimeMissed or late payments on your business credit can have serious consequences. One of the most common penalties is late fees. The average cost for late fees on a credit card ranges from $26 to $39. Over time these fees can add up. Making payments on time affects your credit score as well. In fact, 35% of your credit score is based on payment history. The graph below shows a breakdown of the different factors that can affect your business credit score.
Choose the Right Accounting SoftwareManaging your business accounting can be an overwhelming task especially if you are tracking documentation manually. Having accounting software eliminates the guesswork from bookkeeping. FINSYNC allows you to put your accounting on autopilot. FINSYNC syncs with the majority of US banks, credit unions and credit cards. Our all-in-one solution allows you to create customized reports, track income and expenses, accept payments, and automatically reconcile your accounts with the right invoices and bills. It’s easy to get started. Sign up for a 7-day free trial, no credit card required.
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