Tips To Managing Small Business Finance

Sometimes, the reason for the success of your business is your expertise in setting up and running your business, manufacturing a product, or offering a service.

Many businesses however suffer because of a lack of expertise in financial matters. If you don’t have a lot of experience with managing business finances, it can be a challenge, but it’s also crucial to the survival of your business.

Here’s how to establish responsible financial habits that put your business on the road to success.

1. Pay yourself

If you’re running a small or midsize business (SMB), it can be tempting to put everything into your day-to-day operations. After all, that extra capital can often go a long way in helping your business grow.

Alexander Lowry, a professor and director of the Master of Science in Financial Analysis Program at Gordon College, said small business owners shouldn’t overlook their own role in the company and should compensate themselves accordingly.

You want to ensure that your business and personal finances are in good shape.

“Many SMB owners, especially at the outset, neglect to pay themselves,” he said. “They [believe] it’s more important to get the business up and running and pay everyone else. But, if the business doesn’t work out, you won’t have ever paid yourself.

Remember, you’re part of the business, and you need to compensate yourself as much as you pay others.”

2. Invest in growth

It’s important to set aside money and look into growth opportunities, which can allow your business to thrive and move in a healthy financial direction. Ben Anderson co-founder at the finance depot, constantly reminds business owners that they need to invest in the future.

“A small business that wants to continue to grow, innovate and attract the best employees [should] demonstrate that they are willing to invest in the future,” he said.

“Customers will appreciate the increased level of service. Employees will appreciate that you are investing in the company and in their careers. And ultimately, you will create more value for your business than if you were just spending all your profits on personal matters.”

Please note, If you are looking for business finance, need a small loan, need to buy new equipment, a new truck or just an Overdraft, The finance depot offers a fine range of LOW DOC, Low interest and stress-free loans in 24/48 hrs.

Call or text us now, We will be happy to run you through all the available options.

3. Don’t be afraid of loans

Loans can lead business owners to worry about the financial repercussions of failure.

However, without the influx of capital you obtain from loans, you may face substantial challenges when trying to purchase equipment or grow your team.

You can also use loan proceeds to boost your cash flow and thus face fewer issues in paying employees and suppliers on time.

Plus, the best business loans come with terms and rates that many small business owners can easily accommodate.

4. Keep good business credit

As your company grows, you may want to purchase more commercial real estate, acquire additional insurance policies and take out more loans to facilitate these pursuits.

With poor business credit, getting approval for these transactions and acquisitions may be more difficult.

To keep good credit, pay off all your debt funding as soon as possible. For example, don’t let your business credit cards run a balance for more than a few weeks. Likewise, don’t take out loans with interest rates that you can’t afford. Only seek funding that you can quickly and easily repay.

5. Have a good billing strategy

Every business owner has a client who is consistently late on their invoices and payments.

Managing small business finances also means managing cash flow to ensure your business is operating at a healthy level on a day-to-day basis. If you’re struggling to collect from certain customers or clients, it may be time to get creative with how you bill them.

Too much cash in unpaid invoices can lead to cash flow problems a leading cause of early business failure.

6. Spread out tax payments

If you have trouble saving for your quarterly estimated tax payments, make it a monthly payment instead, This way, you can treat tax payments like any other monthly operating expense.

7. Monitor your books

This is an obvious practice, but it’s a very important one. Do your best to set aside time each day or month to review and monitor your books, even if you’re working with a bookkeeper.

This will allow you to become more familiar with the finances of your business and provide you with a window into potential financial crime.

8. Focus on both expenditures and ROI

Measuring expenditures and return on investment (ROI) can give you a clear picture of which investments make sense and which may not be worth continuing.

Thais Silva, Co-Founder at The Finance Dept thinks that small business owners should be mindful of where they spend their money.

“Focus on the ROI that comes with each of your expenditures,” she said. “Not doing this means that you can lose money on irrelevant or bad spending bets.

Know where you are spending your hard-earned dollars and how that investment is paying off. If it isn’t paying off, cut back and spend a bit more on the initiatives that do work for you and your business.”

9. Set up good financial habits

Establishing internal financial protocols, even if it’s as simple as dedicating a set time to reviewing and updating financial information, can go a long way in protecting the financial health of your business.

Keeping up with your finances can help you mitigate fraud or risk.

10. Plan ahead

There will always be business issues that need to be addressed today, but when it comes to your finances, you need to plan for the future. “If you’re not looking five to 10 years ahead, you are behind the competition,” said Thais Silva CoFOunder at the Finance Depot.

Types of business funding

It is important to remember that business finances aren’t just about your earnings; they’re also about how you spend your money and where you get it. When it comes to the latter, you should understand the two main funding categories below.

Debt funding

Debt funding is a loan that your company repays with interest. Through debt financing, you can quickly access capital that you might not otherwise be able to get for weeks or even months.

Bank loans, government loans, merchant cash advances, business credit lines and business credit cards are all forms of debt financing, which you must repay even if your company fails.

Equity funding

Equity funding, unlike debt funding, does not always require repayment if your business fails.

However, you will likely have to grant your funders a seat at the decision-making table. Venture capitalists, angel investors and equity crowdfunding are all forms of equity funding.

To learn more, read our guide to the difference between debt and equity financing.