When you own a small business, every choice you make, from how you spend money, to how much you charge for services, makes a difference. There are a lot of things that a small business has to do to stay afloat, especially with so many new companies popping up both in brick and mortar spaces, and online.
It’s essential to keep tabs on every aspect of the company because if you’re not educated, things have a propensity to snowball when not prepared. As an entrepreneur, you already know that you have to be ready for anything. Smart financial moves make the difference when sales don’t go as planned or the bathroom in your shop needs to be remodeled.
This is an easy one. Just about every aspect of money and asset management is online. You can automate payments, and make sure all of your bills are sent as immediate alerts. Plus, going paperless is good for the environment, too. Save the trees, y’all.
Make sure you’re using the right bookkeeping system
If you’re a small business, are you using tools that help…small businesses? Quickbooks, Netsuite, all kinds of companies offer small business platforms that are a little different than their consumer-facing counterparts. But, just because all of these are available, doesn’t mean all are equal. Do your homework, and check out the differences between the software. One might change how you keep track of money coming in and out.
Prepare for the off-season
If you’re a landscaping company that plows snow in the winter, it’s important to understand and prepare for radical changes to the environment at a whim. Just because the snow was plentiful last year, doesn’t mean this year will be the same.
Set up a rainy day account when times are good because it’s important to budget for down months. If you keep a statement with “emergency” funds, you can weather the lean times when the house note and payroll is due, despite income coming in.
Think about what will happen five and ten years down the road. Will your current business model sustain? Make predictions about what your growth and finances will look like, and work towards building those. Like saving for a rainy day, start saving small amounts for when you want to hire a bigger team. Or, start saving if you think you’ll be able to get that new shop you’ve always dreamt about. There’s nothing wrong with dreaming big as long as you craft a plan to match it.
Don’t try to do your taxes yourself
This one should be a no-brainer, but there are a lot of extremely skilled tax preparers and accountants who understand the ins and outs of the small business. Investing the time and money to work with someone who knows all of the tax breaks, as well as loopholes, could be a significant help.
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Check your books all of the time
Set aside time every day, or at least once a month, to take a look at your books. Even if you’re working with a professional, it’s critical to know what’s coming and going, and what cash is available. Plus, by understanding how the flow of money is managed, you’ll be able to spot an anomaly, should one pop up.
Know your credit score
Keeping track of your personal and business credit is important because your credit score follows you wherever you go. Many lenders and even suppliers will check your individual credit score.
You’re a small business. You’re not armed with millions like an enterprise level organization is. When someone wants to know why finances look either outstanding or bleak, it’s going to fall on you – the business owner. Good borrowing behavior will save you and your business money because lenders won’t see you as a risky investment. Plus, the better your track record, the lower your interest rate.
Stick to a budget
Keeping to a budget is super important. It can be hard to stick to a certain number because there’s always a new tool or software release that could change things. Focusing on the most critical factors should be prioritized over a new office or a better chair. Set up a budget based on monthly expenses, or use a budgeting app and work within that number. If you want to buy something new, create a small fund for that item. Or, create a catch-all amount that goes to miscellaneous every pay period.
Get receipts for donations
If you donate to charity, make sure you get receipts. There are a lot of built-in tax benefits for businesses that pay it forward, but you need to keep all of the receipts. There are multiple levels of what’s considered “giving” aside from just money. Teams can also donate their time, and their space – all of which can be written off come tax time. If you track where you’re donating to, and how much you’re donating, you could save your business a large sum of money, all while doing a good thing for the community.
It’s important to know that financial fitness begins with a plan and a budget. Your ability to stick to that budget and plan is what will keep your cash flow and your business running strong. By making these smart financial moves, you will be well-prepared to take on any surprise expenses or new ventures!