Financial management is an essential skillset for small business owners. Fortunately, you don’t have to be (or even employ) a veteran CFO to manage your business’s finances effectively. Like most skills, when practiced regularly, financial management is something you can improve over time. Work these 10 tips into your regular business routine and watch your company thrive.
Tips for Managing Small Business Finances
- Separate your business and personal funds – Pay yourself a salary, open a business account, draw a clear line between personal and business finances. This separation will simplify your business’s finances and reduce potential distractions.
- Develop a budget and stick to it – Create a realistic annual budget and don’t spend more money than you have. Other budgeting best practices include setting priorities, leaving room for a little flexibility, and regularly revisiting your budget throughout the year to make necessary adjustments.
- Set clear goals for growth – Outlining your plan to grow the company will allow you to identify how much money you should set aside to take advantage of new opportunities. Keep a list of these goals on your desk so you are constantly reminded to invest in the future.
- Maintain an emergency fund – On the flip side of growth opportunities, it’s also important to allocate dollars each month for things that may set your company back, such as workplace injuries or equipment breakdowns. There are protection plans available for these kinds of emergencies. Learn more about workers compensation and equipment breakdown coverage.
- Stay on top of deadlines – Add all financial deadlines to your calendar to avoid late fees and interest.
- Optimize accounts receivable – Regularly check your oldest accounts receivables to ensure customers are paying you in full and on time. Look for ways to automate this process to improve efficiency and accuracy.
- Eliminate unnecessary costs – At least once a year, look at your business spending and see where you could reduce overhead costs. It could be as simple as changing to paperless billing or as large as moving to a new, budget-friendly office location.
- Manage inventory – Inventory levels are a crucial part of many companies’ cash flow. The more real-time, automatic inventory information you can get, the better (and easier) money management will be.
- Keep documentation and receipts – The IRS recommends holding onto all business receipts for at least seven years in case of an audit. Improve this process by establishing a file organization system, and/or going digital and scanning all receipts and related documents.
- Protect your business against fraud – With the growth of hackers and data leaks, cases of business fraud often go beyond the scope of an emergency fund mentioned above. Reliable cyber security is now a money management best practice every business should be following. For additional protection, it’s wise to look into cyber liability coverage.
Talk to a local agent to learn more about these top 10 money management tips and other ways to ensure your business’s security.
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