As a small business owner, you are expected to supervise all the major functions of the business. Among those functions is finance which is the life and blood of business. In this article, we list down some tips that you can use to manage the finances of your small business.
1. Analyze the Financial Needs and Plan Accordingly
The first and very important step in business finance management is to be fully aware of the financial conditions and requirements of your organization. For this, it is very important that you carefully analyze the accounting report and financial statement of your organization.
The insight drawn from this assessment will help you get a clear picture of your business’s financial performance. With this information, you will be able to set the right financial goal for the business. A standard small business finance plan includes budgeting, accounting, future prediction, tax planning and risk management. Once you’ve defined your financial goals, you can implement a system that aligns both strategic measures in addition to traditional financial measures. This can be done with a balanced scorecard system for finance to get a more “balanced” view of performance and turn your strategic initiatives into specific, actionable steps.
2. Create a Budget and Follow it
In simple words, a budget is an estimation of revenue and expenses over a future period of time. For a small business, having a budget is very crucial. It safeguards you from taking knee-jerk measures in future. A budget helps you develop a clear understanding of what you can expect in the future and prepares you for it.
As a small business, you should first work on an operating budget. An operating budget shows the projected revenue for the financial year along with details such as the business’s fixed cost, variable costs and operating expenses. Next, you should work on the cash flow budget to see the cash inflow and outflow in the organization.
It is crucial to assess the liquidity of the organization. Now once you have created a budget, the next step is to determine to stick to it. Don’t worry if your budget is not aligning with the real numbers. The process of making budgets will whet your skills and over time you will be able to create more accurate budgets.
3. Stay Ahead of Deadlines
For a smooth-running business, it is important to be aware of the deadlines well in advance. This not only secures you from getting into a big financial mess but also makes you more aware and informed about the expenses.
When you are mindful of the deadlines in advance, you would be aware of the amount of money that you will need to pay off the expenses. With sufficient time in hand, you can also arrange for the finances if you don’t have it.
If you do not keep track of your deadlines you might have to pay added interest and late fees, your credit score can get weak, and your relationship with the creditor can get bad. Therefore, it is important to set reminders to be on top of the deadlines.
4. Keep a Tab on Spendings- Corporate Credit cards
Usually, small businesses do not invest in proper finance management services. As a result, they may overlook small expenses that collectively become a considerable portion of the total expenses. This can land on you a mess as these bills pile up.
Furthermore, not keeping a track of your spending may also lead to overspending or misuse of the funds. If you do not keep an eye on these expenses, they may snowball into a big amount that you are not prepared to pay. To keep a tab of all the spending, you can sign up for various online applications. Alternatively, you can seek professional help from experts such as Reachtop Hong Kong Accountants.
5. Keep Your Personal Funds Aside
It is common for small businessmen to blur the lines between personal and official funds. However, it is very important to keep the two separately to have a clearer picture of the organizational achievements. If you keep mixing your personal funds with that of your business, it can result in misleading conclusions.
Alexander Lowry, a finance expert said, “small business owners shouldn’t overlook their own role in the company and should compensate themselves accordingly. You want to ensure that your business and personal finances are in good shape”.
As a business owner, you should acknowledge that you are also a part of the business that deserves compensation. Failing to do so can lead to overspending, not meeting bill deadlines, and missing growth opportunities.
Irrespective of the number of tips you read online, none of them would benefit you until you apply it to your business diligently. Another thing that you should keep in mind is that the need for each business is very different and you will have to exercise your intelligence to see how these tips suit your business.