Being strapped for cash is one of the greatest nightmares for a small business owner. That’s mainly because cash flow is the lifeblood of any small business.
Sound financial management helps your business experience profitability and ensures proper cash flow to sustain business operations. However, over 42% of small businesses face challenges with handling cash flow. Running a profitable business can be extremely daunting and challenging.
Proper financial management plays a huge role in the growth and success of a small business. As a small business owner, you may not have the time or accounting training to properly track your financial information, making financial management a burden.
Fortunately, hiring professional online bookkeeping services like Geekbooks can help you get your numbers in order and stay competitive and profitable without adding an in-house accounting team. Here are some other great ways to properly manage your finances to keep your small business afloat in difficult economic times:
1. Create And Stick To A Budget
Developing a realistic budget is one of the top financial management tips to help keep your small business running smoothly during difficult times. Having a budget for your small business can help you better manage purchases and even result in savings. Besides setting a budget, you need to ensure you stick to it to control your spending, gain valuable insights into your money habits, and determine where you can improve.
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Establishing and sticking to a budget can also help you be more realistic when developing strategies for business growth during difficult financial times. Additionally, you need to update your budget every few months to keep it relevant to your operations and industry standards. Make sure you also have an emergency fund for unforeseen expenses and additional surprise costs that may come up along the way.
2. Use Software For Accounting
You need to re-evaluate your approach if you usually balance your books using conventional accounting methods. Financial management is one of the critical aspects of running a business, whether large or small.
However, it might be overwhelming and difficult to manually keep track of massive amounts of financial data as your business grows. Additionally, invoices and payroll management may be problematic, especially if you have many employees.
However, accounting software can help you effortlessly keep your financial information accurate and up to date. Having accurate and updated financial records allows you to make more strategic business decisions and accurate projections. Automating your accounting processes can save you lots of money through discounted annual subscriptions. Besides saving you money, good accounting software will save you a lot of time and hassle during the tax filing season.
3. Separate Business And Personal Funds
Combining your business and personal funds in a single account can make you more likely to lose track of how you use your money. This way, you may spend your business funds on personal needs and vice versa, resulting in missed growth opportunities and overspending. Hence, it’s always best to separate your personal and business funds to easily keep track of and better manage your finances.
Create a dedicated company bank account to track deposited and withdrawn business funds, making it easier to keep track of your business expenses. This will also give you access to business bank statements that can come in handy when reconciling books and charting profitability.
4. Remember Accounts Receivable
If your small business gives credit to its customers, it’s easy to forget that they owe you money. This is often one of the primary reasons businesses make losses. To improve your financial management, you should keep track of the funds customers owe your small business. To accurately keep track of your accounts receivable, consider keeping a record of every customer in debt in your books and the amount they owe your business.
This way, it will be easier to identify customers late with the payment, so you can send them late notices with invoices to ensure you get paid. Receiving payments is usually more critical than tracking your receivables when it comes to sound financial management. If you need money before the due date, you may consider offering an early payment discount to your customers.
Financial management is crucial in every business, no matter its size. Following the tips mentioned above and adopting sound financial habits can help you get on top of your small business finances. That way, you’ll set your small business up for success even when challenges arise.