10 Tips for Small Business Money Management
It goes without saying that small business money management is critical. But in practice, many small business owners are experts at what they do, not at balancing the books.
Maybe you’re a great chef and just opened a restaurant. Perhaps you worked in construction for years and found an opportunity to get started as an independent contractor. As a small business owner, you excel at what your business offers. But it’s common for small business owners to need extra support when it comes to managing money, especially when you’re balancing cash flow with your operational costs. If this sounds like you, consider these 10 quick small business money management tips.
1. Create a Budget and Keep Updating It
When you start a business, create a budget to help you project costs and keep them balanced with revenues. But don’t let that initial framework guide your company for too long. Each year, look at what you spent and earned and tweak your budget accordingly. Maintaining a budget helps you look out for trends in your business and areas to grow into or areas where you can further adapt.
2. Set Aside Savings
Money is a tool for your business. If you’re too focused on immediate needs and neglect savings, you may not have the capital to take on new projects or cover emergency expenses. Find balance by building saving into your budget – possibly even itemizing your savings relative to specific goals.
3. Familiarize Yourself with Accounting Software
Accounting software can do a lot of the menial work for you, simplifying small business money management tasks and making it much easier to track and manage costs. QuickBooks is one popular accounting system option. But it’s important to choose the right accounting software for your specific needs. Take time to research different options so you can make an informed decision. The right accounting software also makes it easier to file your taxes and ensure you’re getting the highest deduction possible by having your account already organized.
4. Develop a Cash Flow Strategy
This small business money management step builds on your budget. Once you have a core idea of your costs and revenue streams, look at seasonal and sales-related trends in your income. Then build strategies to help ensure you maintain cash flow as steadily as possible. This will help create a cash reserve capable of withstanding unexpected problems.
5. Evaluate Funding Options
Even the most successful businesses may still need additional funding from time to time. Small businesses have several options for funding and small business loans. Take the time to learn the differences between each option, such as alternative lenders and traditional banks. There are many kinds of financing to suit every business need. For example, lenders focused on the small business market will offer working capital loans that help you manage daily expenses, such as payroll and operating costs.
6. Be Realistic
Successful small business money management requires realistic goal setting. Being too conservative or free in how you spend money can be problematic. You need to set realistic spending goals to ensure you’re prepared for fluctuations in your cash flow. It’s important to understand how and why you’re spending money and how and why you’ll be spending money in the future. Having a realistic grasp on your business’s finances will help you manage costs down the road.
7. Document All Expenses
Save business-related receipts. Take the time to track invoices. Document your costs and income carefully in your budget sheet. A paper trail – whether physical or digital – is critical in helping you manage money effectively. It can also simplify taxes, payroll, and similar processes.
8. Separate Business from Personal Expenses
You’ll likely end up investing personal funds into your business, but it’s important to keep your personal and business accounts separate. The best way to maintain a clear separation of your expenses is to set a personal budget and a business budget. Make sure you have separate business accounts and credit cards that are only used for business expenses. This can protect your credit rating and ensure your business is safeguarded from isolated personal financial problems, and vice versa.
9. Take an Accounting Class
While these small business money management tips offer a great start, you should really know the basics of business accounting. Local community colleges and adult education centers are good places to look for fiscal management classes. They’ll provide a better understanding of how cash moves in and out of your business. Additionally, it could be a good idea to hire a professional accountant to help manage your finances.
10. Establish Goals
Once you understand your business finances, set clear goals to work toward. Then consider how additional funding resources can help you achieve them.
Small business money management can be complicated, but we’re here to help!
At QuickBridge, we take the time to get to know our customers so our loan offerings will match their growth efforts. Contact us today to learn more about how we can help you expand or sustain cash flow.