Small Business Finances
The small business market can be very competitive in more ways than one. The most important thing to realize when running a small business is that it can be very difficult to take care of all aspects of your business.
With that understanding, it will also become clear how much of the business may be unknown to the business owner, and how important it is to learn as much as possible.
One of those areas that many small business owners have difficulty with is the financial aspect. It can be overwhelming to consider all of the financial knowledge that is missing and how to go about gaining that knowledge.
For that reason, we’ll look today at the 7 best tips to help owners master their small business finances.
Tip #1: Get familiar with your financial statements
When you consider the most important financial documents any business owner needs to know about, it usually comes down to the three financial statements.
These essential documents are:
- the cash flow statement – this document measures your investments and your financing and operating activities. It helps you determine how much cash is flowing into and out of your business.
- profit and loss statement – this is also called the income statement, and it allows you to review your business’ income and expenses
- balance sheet – this document is known for giving a good idea of your business at any time. It overviews your assets, liabilities and shareholders’ or owner’s equity
When you get familiar with these three documents, you’ll be able to have a much greater understanding of your company’s financial status at any time.
Tip #2: Don’t procrastinate on your invoices
Another great tip overall is to not keep putting off your financial responsibilities. As a business owner, it’s easy to get swamped by everything else happening in your business or life.
Therefore, by thinking of another responsibility, another task you need to do, you get overwhelmed and keep on procrastinating. You need to be aware of what an invoice is and why you need to stay on top of it consistently.
There are many great resources out there to help you with your small business invoicing, both free and paid. Online invoicing software services generally have a lot of features that help you to send your invoices quickly and create expense reports with ease.
Tip #3: Keep your finances separate
Although it’s general knowledge to not mix business with pleasure, many small business owners still mix their business and personal finances. They use the same bank account and same cards for both their personal and business purchases and this will cause big problems for their taxes.
One of the best finance tips is to be very strict in your personal and business expenses. Get separate bank accounts, get separate cards, keep your receipts separate, and always pay yourself first from your business account.
Tip #4: Request discounts
It is surprisingly easier to get free or lower-priced services than you would assume. This is especially true for SaaS businesses, who are always very willing to provide great offers on their services if you ask.
You may be able to not just ask for free, but to barter by providing a service in exchange for another service. For example, if your business does web design, you can offer free consultation or redesign in exchange for invoicing services.
Unless you ask, you won’t know which companies are willing to provide you with discounts.
Tip #5: Cut down on variable costs
There are generally two costs that you have—fixed costs and variable costs. Your fixed costs are things such as property taxes, insurance, and utilities and are less flexible, as there may not be anything you can do to reduce them.
Your variable costs, on the other hand, are more controllable. These are the costs of labor or materials that will change with sales. In order to reduce variable costs, you can try to minimize labor costs, shipping charges, salaries and more.
It is also important to cut back on expenses in your personal life, which will give you greater discipline. Instead of buying your next good or service, ask yourself whether it is really necessary, and if so, whether it is necessary now. These simple questions can help you lower your expenses and build up your discipline.
Tip #6: Measure your financial performance
One of the best finance tips concerns your strategic business goals. In order to properly determine the goals and the steps to achieve those goals, you’ll need to use a goal-setting system, such as the SMART system.
SMART stands for Specific, Measurable, Attainable, Relevant and Timely, and all concern the goal that you have, whether long-term or short-term.
When you have these goals, you will be able to measure and compare your financial performance regularly to past ones. This will help you set better goals for the future and provide you with better finances.
Tip #7: When in doubt, get some help
This is a particularly glaring mistake, but one that is easy to fall victim to. Many small business owners just put too much responsibility on their shoulders and sooner or later they burnout.
This is because they’ve transformed themselves from the standard business owners to the small business Superman. They do the marketing, the sales, the accounting, the customer service, the social media—they even fix the water pipes if you ask them.
They simply do too much, and their business suffers for it, sooner or later. This is not recommended. Although there is a cost to hiring expert help, there is also a lot of time and money saved.
Even better, getting help means you’ll be able to focus on the most important part of your business, and thereby increase your finances.
These are some of the best finance tips available for small business owners and entrepreneurs. Taking care of your financial responsibilities is no joke, but it doesn’t have to be extremely difficult. Although there are often difficult times in every business, this should not be excused for bad money management.
By educating yourself and learning the finance tips to help you and your small business, you’ll find greater success and much more improved finances.
Author bio: Bernard Meyer is Head of Marketing at InvoiceBerry, the online invoicing software dedicated to helping small businesses and freelancers send invoices quickly and professionally. You can find him on Twitter and LinkedIn.