Any business owner needs a good understanding of their finances in order to be successful, and there is plenty to be learned from having a thorough understanding of the figures. This is particularly important among small businesses where every dollar can make a difference, and budgets can be tight.
When it comes to small business finances, some important tips can help any business ensure that it has a full understanding of its finances:
Keep accurate and detailed records
Gone are the days when business owners had huge ledgers containing details of all their financial transactions – it’s easier than ever before to keep records with plenty of software designed to help you keep track of all your transactions.
If you have lots of physical paperwork, it’s worth digitizing these where possible to ensure that you have instant access to anything you might need. Whether it’s invoices or delivery receipts, having everything cataloged and clearly stored will make all aspects of your admin easier, from setting your prices to doing your taxes.
Keep your business and personal finances separate
With the gig economy growing, an increasing number of people are taking on side hustles and turning their talents into small businesses. When you first start making money, it’s tempting to treat it just like any other income, but it is a good idea to keep things separate from the start to help you understand the cash flow of your business.
This works both ways – business expenditure shouldn’t be coming out of your personal pocket, and incoming payments should be offset against your outgoings before you consider them to be profit. This makes it easier to account for everything when it comes to doing your taxes and helps you determine the financial state of your business.
By maintaining separation between yourself and your business, you can also limit your personal liability and protect your own assets to minimize your risk. Although you may need to take on some business expenses when you are first starting, your goal should be to transfer these to the business as soon as possible.
Automate as much as you can
As a small business owner, the chances are that you are doing almost everything yourself, so you can save time and therefore money by automating as many processes as possible. Financial management systems are designed to help, and using services such as printable deposit slips and automatic bill payments can reduce the chance of making mistakes as well as help streamline your administration.
Adopting automation in the early days will really help as your business grows. Paying your bills automatically means no late fees and, best of all, you will have the headspace to deal with the more important aspects of your business rather than keeping track of everything yourself.
Value your time
For those starting in business, particularly those who have monetized their hobby, it can be easy to underestimate the value of your own time. While it may be easier to put a value on the costs of your materials, the time that you put into everything from building a website, dealing with customer queries, processing payments, packaging items, and any other administration needed should all be factored into the cost of your product or service.
Make a budget and stick to it
It’s not the kind of thing that excites most business owners, but having a budget is an important part of growing your business. While most people agree that they want their profits to increase, budgeting is the first step to making that happen.
Think of your budget as a business success tool that will help you to really drill down into your financials and forecast for the future. It’s a great way to set yourself realistic targets and help you to check whether you’re staying on track with your expenditure, and you can make it flexible enough to accommodate any opportunities or challenges you might face.
Also Read: What Is Payment Orchestration and Why Does Your Business Need It?
