Negosentro.com | 4 Tips for Managing Your Small Business Finances | As a small business owner, you likely realize that few things are as important as properly managing your money. Meeting expenses and having adequate cash on hand for profit and reinvestment are both critical to the success of almost any operation. Read on for a few tips to help you stay on top of your business finances.
Develop a Budget
You probably use a budget to track your personal income and expenses, and it’s just as important to create and follow a budget for your business. By using software designed for accounting for small business, you’ll know how much money you need to spend to maintain operations, and you’ll be more informed when it comes to managing your revenue and expenditures. By keeping an updated budget, you can see at a glance if your income is enough to cover your ongoing expenses and where there might be gaps. You’ll be able to quickly make adjustments for any shortfalls, or react to opportunities when you’re generating more than you’re spending.
Build a Cash Fund
Once you’ve begun following a monthly budget, you can implement a plan to build a rainy-day cash fund. After meeting your routine expenses, it’s a smart move to begin putting aside a cash reserve so you are prepared for unexpected expenditures. Everything from replacing a busted cell phone to paying for licensing you weren’t aware you needed can spring up at any time, so having money set aside for sudden expenses can help keep you profitable. Even non-emergency needs may arise, such as one-time deals on items you’d like to acquire, for which you’ll be glad to have extra cash available. You won’t need to bend your regular budget if you’re prepared with a separate reserve fund.
Stay on Top of Payables and Receivables
As a business owner, you probably have many bills that come due at varying times of the month; merchandise invoices, rent payments, loan installments and more can seem to pile up quickly. In order to stick within your budget and maintain good business credit, it’s important to pay your debts on time. Keeping a calendar of due dates or utilizing accounting software can help ensure that nothing falls through the cracks.
You’ll also want to implement a plan for managing receivables. If you’ve allowed customers to purchase on credit, you need to have an accurate record of when payment is due to you. Closely tracking your accounts receivable will allow you to include future receivables in your monthly budgeting, and will also help you flag any missing or past-due payments so you can follow up.
Practice Good Timing
Most businesses incur extra expenses from time to time; perhaps you need to invest in a new software system or add more seasonal merchandise to your inventory than you expected. Aside from having a reserve fund to pay for these expenditures, you may also benefit from timing your purchases to when they will bring you the greatest value or savings.
As an example, fall and winter may be the best months in which to purchase new hardware like computers and printers, since many major retailers are offering discounts intended for Christmas shoppers. Buying items like air conditioners out of season can also score you some savings, while December is often the best time to buy a car as dealerships are motivated to achieve year-end sales goals. It can also be beneficial to purchase just about anything toward the end of the year, as deductible items can be claimed on your taxes for the current year but not paid for until the next.
With a bit of simple, but smart, planning, you can stay on top of your finances and keep your business on a profitable track. By creating and sticking to a budget, setting funds aside for unexpected expenditures, tracking your payables and receivables and making purchases at the best possible time, you’ll be going a long way toward ensuring that your business is financially sound.