simpcity Have you started a small business with a winning product on your side? Well, congrats! But, believe me, nothing is sorted till your finances are organized. And especially with small businesses, I’ve observed that they may have a hard time managing their finances. Well, as small business owners already have a lot on their plates, managing finances effectively may be a difficult task.
That being said, finances cannot be ignored and I’ve got a few tips on how small businesses can manage their finances with ease. Also, not only will these tips help your small business stay afloat, but also bring about a solid financial growth for your small business.
Here’s how you can start managing finances of your small business:
Create a Comprehensive Budget
A detailed budget is a must for small businesses as it may inform them about the diverse nature of expenses, debts (if any), routine payments, income streams, and more.
When you’re making a detailed budget, it’s best to jot down every expense, including the overhead costs, subscriptions (if any), marketing expenditures, etc. Then, list down the income streams, for instance, affiliates or partnerships with other brands.
This way, you will get a clear picture of how much money you’re making and how much of it is going out. Also, budgeting may stop you from overspending and help you better understand your finances.
Track Your Expenses
As you make a detailed budget, you’ll also know about the diverse nature of expenses. The way I see it is that it brings an opportunity to cut down your expenses or find more cost-effective to get your tasks done.
Talking about the expenses, the overhead costs such as rent, utilities, tools subscriptions, or advertising may have the biggest expense share in a company. And, minimizing the overhead costs may not be as hard as you think.
I subscribed to Xfinity packages for my business when I started curbing down my expenses. Essentially, I bundled the internet and phone plan which considerably lessened the burden on overall budget.
So yes, when running a business, it’s important to understand that when you lower your expenses, it automatically translates to better profits.
Build an Emergency Fund
Just like most people maintain a steady 3-6 months of emergency funds in their lives, you have to create one for your business. You may not have any debt or generate a handsome profit every month, but you can never be sure of setbacks. So, in case your business gets a major hit or the sales plummet, an emergency fund will be your safety net.
Also, you may not need to take a loan, downsize, or sell your business assets if you have a solid emergency fund in place. Plus, building one is quite possible as you may need to put a small percentage of your profits into this fund. However, do make sure to be disciplined with emergency fund and not to touch it unless the situation demands.
Create a Billing Strategy
Most businesses encounter vendors or suppliers that may delay their payments or invoices. It is surely frustrating for businesses, since they always need to be vigilant about their cashflows.
They may not have an option to opt out of doing business with them. While they may slightly force vendors or clients on timely payments, it’s best to incentivize this approach. Depending on the nature of their business, they can create a billing strategy to incentivize vendors/suppliers on timely payments.
This way, when lucrative incentives are on the line, most vendors/suppliers may fall in line. However, do make sure to come up with such incentives that do not cost much while at the same time, seem lucrative enough to attract the vendors and suppliers.
Know Your Deadlines
With already so much on the plates, it may be hard for small business owners to keep track of deadlines. Every month, businesses may need to pay their suppliers/vendors, debts, credit cards, and more. And, in case a payment is delayed or missed, more interest may be charged and not to forget the bad reputation I’d portray on the business.
Also, if you’re unaware of your accounts payable till the deadline date, it may be an uphill task to arrange the payments on short notice. In short, it’s best to always clear your accounts payable before the deadline so you don’t have to deal with uninvited problems.
Bonus Section: Best Budgeting Apps for Small Businesses
In this section, I will share a few budgeting apps for your small business. Well, besides reminding you about the payment deadline, the following apps will help you manage your finances effectively:
- Mint – Best for payment reminders and expense tracking.
- FreshBooks – Best for creating invoices and scanning receipts.
- PocketGuard – Best for subscription tracking.
- QuickBooks – Best for inventory management.
- Float – Best for visual representation of your financial data.
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