Established business owners have mastered the art of managing their finances effectively. Therefore, as a small business owner, you need to gather practical financial tips you can use to keep your business going. If you don’t have a financial background, it is crucial to educate yourself about financial management to take your firm to the next level. Below are financial management tips for growing your small business.
1. Pay Yourself First
Paying yourself first is not a selfish move; it helps you save and determine whether you are making profits or losses. Many startup business owners believe in paying employees, restocking, and financing other activities, but neglecting themselves. This is not wise because you are likely to lose motivation if you don’t get anything from your business.
Therefore, you need to set a monthly salary for yourself to gauge if you can still finance your business after paying yourself. This will also help you have cash for unexpected expenses. It is also advisable to have separate your personal and business financial bank accounts. You should never use personal funds for business or vice versa unless you have a valid reason to do so.
2. Avoid High-Interest Loans
Not every small business owner can finance all operations by themselves. At some point, you might need the help of a lender or a suitable financing option. As much as they are lifesavers, you need to be careful when choosing a method to finance your company. Avoid high-cost debts that could put your business in jeopardy. It will be best if you compare the interest rates of different lenders to choose one with reasonable rates.
You can also consider applying for a financial grant from donors and relevant government agencies since they are non-refundable. However, you need to do an excellent job during the application process to qualify. For this reason, it might be necessary to work with professional grant writers to hire to increase your chances of approval.
3. Manage Your Books of Accounts
Not keeping track of your income and expenses is a recipe for financial struggles. It is vital to hire an experienced bookkeeper to manage your accounts. The bookkeeper will ensure that vendors have been paid on time, legal transactions are made without delay, all transactions recorded, and the profits are set aside.
You should invest in technological tools such as accounting software that will allow the bookkeeper to share the records with you swiftly. Managing your books will also help you know the best way to distribute money to different departments in the company for development purposes.
4. Pay Taxes Periodically
You should never let your taxes get out of hand. It is more manageable to pay them monthly. Therefore, when paying your monthly bills, consider the taxes to be one of them. It is vital to work with a tax professional to help you make the right calls.
5. Reduce Your Expenses
If you want to maximize profits, you need to cut your costs and invest the extra money back into your business. It is essential to have a well-written plan of expenses, such as salaries, rents, invoices, taxes, marketing campaigns, debts, utilities, team building activities, and renovations, among others. State the amount you are willing to use on every expense and don’t surpass it.
With time, you can also reduce some expenses. For example, you can negotiate with vendors to get supplies at a fair rate. Negotiate with several vendors and select one with a friendly deal. At times, a vendor can even extend the credit repayment period, which will allow you to finance other projects in the meantime.
Managing small business finances is usually challenging, especially for first-time business owners. But it is not as hard when you have the right tips. These simple steps can help you manage business finances better.