10 Finance Management Tips Every Small Business Should Know

Running a small business can be like juggling flaming torches on a unicycle – exciting but potentially hazardous! Managing your finances effectively is essential to avoid setting your financial circus on fire. Here are our top 10 finance management tips for small businesses.

1. Pay Yourself

Running a small business often feels like a superhero saving the day on a tight budget. But amidst the heroic deeds, remember to pay yourself. While it's tempting to put all resources into the business, you, the business owner, need compensation too. Neglecting your own payday can be risky, so remember: you're not just the CEO; you're the superhero behind the scenes. Just don't be the hero who forgets to pay themselves.

2. Invest in Growth

Small business owners should always keep an eye on the future. It's like upgrading your business to the deluxe package – customers will love the top-notch service, employees will feel like they've hit the career jackpot, and you'll be creating more value for your business. So, gear up, plant those seeds, and watch your business garden flourish.

3. Don’t Be Afraid of Loans

Don't let loans scare you away. While the thought of debt might make your wallet shiver, remember that loans can be your financial sidekick! Without that influx of capital, acquiring new equipment or expanding your team can be as challenging as teaching a cat to do tricks. Plus loan proceeds can boost your cash flow, ensuring you're paying employees and suppliers on time. So, don't be loan-shy; let them be your financial allies.

4. Maintain Good Business Credit

Maintaining good business credit is essential for ensuring your company's financial health as it grows. This credit serves as a key to accessing opportunities like purchasing commercial real estate or obtaining necessary insurance policies and loans. To safeguard your creditworthiness, prioritize prompt debt repayment. Avoid carrying balances on your business credit cards for extended periods and be cautious when taking out loans with high interest rates. Pursue funding that aligns with your ability to repay in a timely manner.

5. Have a Good Billing Strategy

Crafting a good billing strategy is like being a detective in pursuit of your elusive late-paying clients – it requires a little creativity and a touch of finesse. Every business owner has their fair share of clients who seem to have mastered the art of invoice evasion. To keep your business's cash flow in tip-top shape, it's essential to avoid becoming a financial detective story. Instead of bombarding your late-paying clients with a barrage of invoices and phone calls, consider a more playful approach. How about transforming your payment terms into a fun game of "2/10 Net 30"? If they pay within 10 days, they get a 2% discount – it's like offering them a mini treasure hunt! If not, well, they have 30 days to figure it out.

6. Spread Out Tax Payments

Managing those quarterly estimated tax payments can feel like trying to wrangle a herd of wild squirrels – tricky business! But fear not, there's a clever solution: By breaking those tax payments into monthly chunks, you can make them as routine as your daily coffee fix. Plus, enlist the help of your trusted tax nerds to streamline the process. Who knew taxes could be so... manageable?

7. Monitor Your Books (or let us do it for you)

This may seem like common sense, but it's a crucial practice. Dedicate time each day or month to review and monitor your financial records, even if you have a bookkeeper. This habit not only helps you become intimately acquainted with your business's finances but also serves as a window into any potential financial shenanigans.

8. Focus on 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. Small business owners should be mindful of where they spend their money. Focus on the ROI that comes with each of your expenditures. 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. Establish Good Financial Habits

Establishing internal financial protocols is like giving your business a trusty financial GPS – it ensures you stay on the right path and avoid any financial detours. Even if it's as simple as dedicating a set time to review and update your financial information, these protocols are your co-pilots on the journey of protecting your business's financial health. And let's face it, we're all too familiar with the constraints of time, money, and technology in the small business universe. Weak internal controls can lead to employee shenanigans or unexpected disappearances of your dough, and nobody wants legal problems on the business menu. So, put those financial protocols in place, and keep your business on the straight and narrow.

10. Plan For the Future

While there will always be pressing business issues requiring immediate attention, it's crucial to extend your financial planning well into the future. Ignoring the long-term perspective could leave you lagging behind the competition in the race for financial success.

Managing your business finances doesn't have to be all doom and gloom. By following these finance management tips, you’ll be prepared to handle anything that comes your way. And if you need some backup, reach out to us today.