Effectively managing your business finances as a small enterprise can be the difference between success and failure. Basic accounting skills, getting organised and learning how cash flow works in your business are going to be vital to ensuring that you have the resources necessary for growth. Whatever stage your small business is at, these are our top tips to help you manage your finances better.
● Don’t forget to pay yourself. It’s tempting to consider yourself a cheap - or free - resource when you’re growing your business. But compensating yourself for the work that you do is vital to ensuring that both your personal and business finances are in good shape.
● There’s no need to avoid debt. In fact, debt is a key part of growth for many small businesses and the kind of cash flow it can free up can be difficult to achieve in any other way.
● But make sure your credit is good. As your business grows you may need to occasionally rely on credit, whether that is to get approval for future loans or the best insurance policies. If your credit is good then you’ll be offered attractive deals and get easily approved so it’s essential to ensure that you’ve got the infrastructure for preserving good credit in place. Simple tips include making existing loan payments on time and keeping credit card balances low.
● Regularly review your books. Even if you’re working with an accountant you still need to set aside some time every month to review your books. You’re looking for issues and anomalies but also trends that could inspire ideas for growth.
● Set aside cash dedicated to growth. Once you’ve got all your basics covered there needs to be a fund for investing in the future of the business. Whether that’s developing new products or attracting top talent, it can give you a strong competitive advantage.
● Stay on top of invoices and payments. These often represent a significant proportion of cash flow in, and so they are vital. Make sure you have a robust system in place when it comes to invoicing, from when you issue the invoice to what happens if it isn’t paid. Ensure your payment terms are clear so that you have a good basis from which to chase people who don’t make their payments on time.
● Change the way you pay tax. If you don’t find it particularly easy to make big payments then spread these out over a number of months instead.
● Get used to planning ahead. Learning how to plan and forecast for more than just the next few months is an essential skill. You should be able to look past the next year and get an idea of what your business’ finances are going to look like - and what your financial strategy needs to be for the coming months to achieve your business goals.
Managing your small business finances isn’t rocket science. But it does take commitment to consistent practices and a willingness to spend some time understanding the consequences of the figures. Find out more by booking onto our Business Friendly Finance training course.