These are some of the most valuable tips for small business owners to manage their finances successfully.

1.Keep Your Business & Personal Accounts Separate

Your small business finances must be kept away from your personal finances. It helps in avoiding confusion during record keeping. If you have a separate bank account for your business, it offers you a clear understanding of the cash that is available for business.

• You should not pay your business-related expenses through personal credit cards or bank accounts.
• You should not transfer the money from your bank account to your personal account.
• Have a business savings account and business chequing account for putting money aside and receiving payments, respectively.

It’s better to keep personal finances and business finances separately. It helps you keep your finances secure without losing out on personal finance due to business difficulties and vice versa.

2.Digitize Account & Finance Management

In this era of technology, it is easier to sort things out than ever before. There is an app for everything, and storage is unlimited. Digitizing your documents, accounts, contracts and every other business document is probably the best way not to feel like you are swamped with unending paperwork all the time when you should be working.

• If you decide to keep hard copies, keep separate files or compartments and give them clear tags. You can store most of your essential paperwork online.
• Accounting and bookkeeping records can be stored on accounting software.
• Bank records can be stored in a mobile banking app.
• You can save all your business contacts in a note-taking app or Cloud.
• You can save trademark applications and patents, permits, and licenses on Cloud.
• Employee records and essential financial information can be handled by human resource software.
• You even have apps like InvoiceOwl to manage your daily invoices and payments.

 

3.Take Advice from Professionals

Having the right set of financial professionals providing you with advice will help you stay on track. They will give you the valuable information you need to know to manage your small business finances better. It will allow you to take some load off your mind and focus on more immediate accounting tasks.

• Consulting with a CPA helps you sort out financial strategy, business insurance, and financial reports. They will help you get your business’s financial standing clearly.
• These professionals can create a profit and loss statement, a perfect balance sheet, and even bank statements.
• They can keep you up to date with unexpected expenses and any net profit margin or loss incurred during the financial year.
• Work closely with tax professionals to file tax returns and meet your tax obligations, so you can get help in saving some money.

4.Frugality Pays in Business

Being frugal in business means only spending on what is essential so that it allows you to be efficient. Your business requires you to have a fine balance between cost-cutting and making intelligent financial decisions.

Being frugal doesn’t mean you stop paying for your unpaid invoices or do not spend on unexpected expenses. It simply means you will have to think clearly before making big purchases or decisions that may affect the financial health of your business.

Don’t just be frugal in paying others, be frugal while also paying yourself a salary. As a business person, you already know how difficult it is to earn that money. Being frugal about it only shows how much you value. Eventually, frugality pays in business and life because a penny saved is a penny earned.

5.Manage Debt Properly

Debt is a fact of life, not just for us individuals but for businesses as well. Debt can be in any form: business credit cards, small business loans, startup funding, commercial mortgage payments, or bank loans for capital equipment or property or equipment lease. There are hardly any entirely debt-free businesses. So, a debt-free business in today’s world is a myth.

Borrowing is completely fine. You need to keep track of the costs associated with the borrowing. The capital amount, the interest rate, and several hidden charges can cost you a lot of money.

You should have a clear financial plan to resolve the debt. The plan will require you to look into the debt closely. Assessment of debt on a day-to-day basis is necessary. Get an accountant to help you wherever you think you need help.

6.Study Your Cash Flow Well

The biggest challenge faced by a small business is often the cash flow. Getting accurate inflow and outflow charts for your business will present you with valuable insights into your business’s valuable assets. You can use accounting software to generate a cash flow chart. You can get an accountant to help you understand your business cash flow better.

Studying your own business revenue flow chart helps you identify a pattern in your business. These patterns help you understand where you are going wrong in business. Studying a flow of your business revenues regularly allows you to control your finances and control any expenses where necessary.

• Cash flow charts can help you identify the potential risks of money problems in the business.
• It helps you to restructure certain aspects of your business to avoid any financial dips.
• While studying the money flow, it is the size of the difference between the inflow and outflow that matters the most.
• It helps you improve your credit rating.
• You can make adjustments inflow of your cash by better aligning your inflows with outflows.
• Make an annual revenue forecast. It helps you plan for more significant purchases and advancements that require a more considerable amount of cash to improve the business line.
• It shows you the certain amount that you require to keep your business running smoothly.

7.Pay Yourself First

Paying yourself doesn’t mean you have to suck out all the profit from the business. But paying yourself is an excellent exercise to save money for the future or test your business’s profitability.

In a way, paying yourself only increases more savings for the business. Banks and financial companies often look at business owners who pay themselves as highly committed. Paying yourself has several benefits. Some of those benefits are secrets that only your accountant will share with you.

• Paying yourself helps you create a safety net for unexpected expenses or operating expenses.
• When you pay yourself, you can try and work as an emergency fund for yourself and your business.
• It can help you set up a good financial habit and build towards the future.
• As a small-scale enterprise owner, you can’t overlook your role in the business. It is vital that you keep compensating yourself accordingly.
• You need to remember that you are a part of the business. So you need to compensate yourself as much as others.