Running a small business is rarely easy especially when factoring in the financial side of things. If this is something you do alone, you will understand how time-consuming and complex financial management can be!
There will be times when you may have to work overtime if you haven’t had time to sort your finances in the day. And if you’re not very proficient in this area, you may end up making common money mistakes, such as forgetting to budget for your taxes.
Still, fear not. If you’re feeling overwhelmed by your business finances, here are some tips to help you manage them better. In the process, your life should become easier too.
#1: Separate your business and personal finances
If you don’t have a separate account for your business finances, you might get very confused when working out your income and expenditure. You might get into a muddle with your spending too, which can be detrimental to both your business and personal finances. But if you have separate business and personal accounts you will know how much money you have for both aspects of your life. This will help you to consider your spending and you will also be able to budget better. So, if you haven’t yet done so, compare business bank accounts online and choose a company with favorable interest rates.
#2: Don’t always rely on loans
Business loans don’t always have to be a necessity. If you can find ways of running your business cheaply, you won’t need to take out a loan for different aspects of your business. We will discuss one way to do this in a moment.
Of course, there will be times when you will need that extra cash injection. It might be to fund new equipment or to take on new employees. A loan can sometimes seem like the right answer, but as you can see in the following article, there are other ways to fund your small business. Have a read and consider the various options that may be available to you. But if you do take out a loan, remember to look for the lowest interest rates to reduce your monthly payments.
#3: Compare prices on everything
Why pay more when you could be paying less? Comparison shopping will be something you will be well used to for aspects of your personal life, such as buying fashion or paying for utility bills, so consider the same for your business. Compare prices on everything as you will boost your profits if you choose affordable options.
Compare suppliers and opt for those that will provide what you need at cheaper prices (but remember to factor in quality too). Save money when you need to do an international money transfer by comparing banks and the various financial services you will find online (click on the previous link for one affordable option). And save money on shipping by comparing shipping companies, remembering to factor in any hidden fees too. These are just a few examples but consider the same for all other aspects of your business spending.
#4: Give your finances a weekly check-up
At the end of each week, get into the habit of checking your finances. This way, you will know how much you have coming in and how much you have going out, and this should give you the incentive to make cutbacks if you need to. You will know if clients haven’t paid you too or if they have paid you less than expected. This will give you the incentive to chase them up if you need to. And you will also become aware of any hidden charges a bank or service provider has burdened you with, and this should give you the incentive to query these.
You will reduce the chances of falling into financial jeopardy if you commit to these weekly check-ups, so schedule in time to do so. Be sure to use the various budgeting tools available to you too, as these will be helpful if you need help staying on top of your finances.
#5: Channel some of your income into a savings account
You never know when an emergency situation might hit your business. Your computer might give up on you. An unexpected tax bill might fall on your lap. And a customer could take legal action against you if you have failed to deliver on your promises. The upshot of all this? Higher expenses of course, and your business could suffer if you don’t have the finances to cover the costs you have incurred.
This is where a savings account comes in useful. By channeling a portion of your monthly income into it, you will have money set aside to manage any emergency situations. You will also have money available to cover any purchase you need to make in your business, so having extra set aside is always handy. Compare savings accounts online and as we said before, choose an account with favorable interest rates.
#6: Spread out your tax payments
As can be seen in the following article, there are ways to reduce your small business tax bill, so don’t assume you have to pay more than you need to. However, if your tax bill is still higher than you expect it to be, you don’t have to pay it all at once. Treat your tax bill like any other monthly expense and spread out your tax payments over the year. By doing so, you will be better able to budget for your tax without the need to make one huge payment when your tax deadline hits.
Going back to our last point, remember to put money aside for your taxes. This way, if your tax bill is more than you imagined, you will have money set aside to cover the expense. Consider the services of an accountant too, as they will give you all the advice you need on managing this aspect of your business.
By finding better ways to manage your small business finances, you will reduce the chances of a financial pickle that could harm your business. So, consider the suggestions we have given here and take the necessary next steps to manage your income.