The US small business community is set to reach new heights this year. According to a survey commissioned by QuickBooks, as many as 17 million US employees want to start a business in 2022. With the competition gaining steam, new entrepreneurs must pull out all the stops to stay afloat.
It takes more than just a good idea to get a company off the ground, you also need to have a handle on your cash flow. Effective financial management is crucial to surviving in a dynamic industry. Apart from guiding your day-to-day decision making, it can help measure your performance/progress in the long run.
But contrary to popular belief, you don’t have to be an accounting expert to navigate business financial management. Here are a few tips to keep your company in the black at all times.
Cut Back on Costs
When you’re running a business, every penny counts. You cannot expect to turn a profit if you spend more money than you’re taking in. Controlling fixed and variable business expenses can help you make the most of your capital.
Try these hacks to trim the fat.
- Outsource certain tasks to freelancers instead of hiring full-time employees.
- Purchase multiple insurance policies at the same time to get a price break
- Look for free resources wherever possible
- Negotiate a lower price with vendors
- Consider your office supply costs
In addition to this, track your monthly expenses and compare them against past costs. Address potential problems, such as a lack of funds or overspending. The quicker you act, the lesser your chances of becoming cash-strapped.
Get Professional Help
Make no mistake: financial management isn’t something you can master overnight. There are plenty of working parts to consider. Hence, it’s best if you consult a certified business financial advisor for expert assistance.
A financial advisor can help you make sound decisions for your business. They can:
- Evaluate your monthly invoices and identify red zones
- Analyze market trends
- Offer personal finance tips to secure your golden years
- Ensure your legacy passes on to the right heirs through a sound succession plan
- Provide an objective perspective for your growth plans
In this regard, consider hiring a financial advisor in your city or state. They are more likely to share facts, data, and ideas in line with local market trends. For example, if your business is based in Gainesville, then you will benefit from seeking financial advising in Gainesville.
One of the worst mistakes entrepreneurs can make is blurring the lines between personal and business finances. The last thing you want is to mix your assets. Unless you’re careful, you may land in trouble with the IRS.
To avoid this, open a corporate banking account and ensure all your transactions are business-related. In case you need money for personal reasons, transfer the amount to your own checking account first. Be sure to label it as a draw to prevent ambiguity.
Moreover, charge business payments to a separate credit card. This will make it easier to track and monitor your spending. You may also be able to leverage perks like no-interest financing and cashback rewards, among other things.
Also, set a budget for your business and stick to it. Do not pump out money from your personal accounts to bridge a shortfall. Likewise, you shouldn’t skim off profits either. The trick is to pay yourself a salary and behave as if you were working for someone else.
Maintain Good Credit
As your business grows, you may need some help to fund expanded operations. This is where a good credit score can help. Besides making it easier to qualify for loans, excellent business credit improves your overall credibility.
Use these steps to achieve a strong credit score.
- Pay your bills in a timely manner.
- Pay off debts, repay vendors, and reduce outstanding balances without delay.
- Closely monitor your credit report.
- Handle your tax lien swiftly.
Digitize Account Management
Living in the age of technology, it only makes sense to use accounting software. After all, nobody enjoys pouring over heaps of balance sheets during tax season.
Digitizing your accounts is a great way to go paperless. Online accounting and invoicing tools can help you streamline your business and maintain accurate, efficient records. Plus, they allow you to keep things organized and backed up, so you never risk losing vital documents.
Have a Reliable Savings Pool
It’s safe to say that we’re living in a volatile economy. As per the UN Department of Economic and Social Affairs, new waves of COVID-19 infections, persistent labor market difficulties, and rising inflationary pressures have stalled the global economic recovery considerably.
You should have enough savings to cover potential business losses in such a scenario. Be sure to include a savings reserve in your budget for the upcoming financial year.
The Bottom Line
While entrepreneurship is an exciting affair, it can take a toll on your nerves, especially if you have no idea how to manage your cash. Take a cue from the tips mentioned above to keep your business finances on the right track. Or, you can trust a financial advisor to suggest a feasible course of action for your company.