As a small business owner, you have numerous responsibilities. This can lead to the temptation to overlook specific tasks, particularly those involving finances, which can be difficult and may fall beyond your expertise or experience. Below are some effective financial practices to help you manage your business and increase your chances of success.
Pay yourself
As a small business owner, it can be tempting to reinvest all your earnings into your business. However, it’s crucial to ensure you pay yourself as well. It’s essential to be financially stable on a personal level and cover your expenses. Additionally, it’s necessary to set aside funds for your retirement. Be sure to get consistent income from your business for your financial needs.
Have a separate business bank account
Combining your personal and business finances complicates tracking your business performance and financial status. You can more effectively oversee your expenditures by maintaining separate bank accounts for your personal and business finances. Additionally, this separation simplifies the tracking process during tax season. Therefore, it’s essential to have distinct accounts for your business and personal finances and ensure that your salary (as mentioned previously) is deposited into your account.
Have a good billing strategy
As a business owner, you will encounter clients who delay their payments. The funds that your clients owe you will only be available once they are deposited in your bank. Keep an eye on your invoicing system to track which clients make timely payments and which are slow to settle their invoices. You might need to revise your payment policies if a significant amount of your money is tied up in outstanding invoices.
Think about implementing interest charges for delayed payments or establishing stricter payment terms. Alternatively, you might provide a small discount for payments made within 10 days of invoicing. Consider requesting a deposit for your products or services to help maintain cash flow while you await the remaining payment from clients.
Send out invoices right away and check in before the payment due date to avoid delays in receiving payment. If you’re dealing with larger corporations that have specific payment terms, understand those terms and take them into account when issuing invoices.
Keep your receipts
With the advent of digital platforms for overseeing your business’s financial elements, you no longer need to store physical receipts in your office. You can now go paperless and maintain all your receipts in a digital format.
Be aware of the regulations in your region regarding the duration for which you should retain receipts, payment records, and other financial documents, and keep them for at least that amount of time. If you continue to use paper receipts, ensure that you have a system for organizing them so they are manageable and easily accessible when needed.
Have a budget
Your budget serves as a blueprint for achieving success. It outlines the expected income and potential expenses for a specific timeframe. You can foresee periods when your earnings might increase and times when your costs may rise significantly. Furthermore, lenders, investors, and other interested parties may request a budget when evaluating the possibility of financing your enterprise.
Final thoughts
There are additional approaches that can assist you in managing your business and positioning yourself for financial prosperity. These strategies include automating bill payments, maintaining a cash flow statement, and selecting the most suitable business structure for your needs. However, for a starting point, developing a budget, organizing your receipts, modifying your billing strategy, and setting up a salary that you deposit into a different bank account are essential initial steps.
Are you interested in discovering how we can assist you in managing your finances? Contact us to find out more.