For small businesses, money is often tight. Knowing how to properly manage your cash flow will allow you to increase your chances of experiencing long-term, sustainable success.
Most people think about money management in terms of personal finance, but it’s equally important in running a successful small business. As you seek to put your business on the right track, here are some tips to keep you ahead of the game:
Never Mix Your Personal Finances
As tempting as it may be, never mix personal and business finances. Known as comingling, this can create tax complications and legal problems – particularly if you have formed an LLC online.
If you comingle funds, you’ll likely lose the liability protection due to a clause known as “piercing the corporate veil.” In other words, all of the time, money, and effort that went into incorporating will be for nothing.
If you’re worried that you may have already comingled funds in the past, you need to proactively remedy the problem.
Develop A Concrete Budget
Every business, no matter how small, needs a concrete budget. In addition to helping you see how much money is coming in and going out each month, it lets you see an itemized breakdown of expenses. When money gets tight, this gives you the chance to quickly eliminate the unnecessary ones to free up cash.
Use The Right Loan Products
When it comes to taking on debt, be smart about which financial products you use. And while there are a variety of business loan options, you may actually find that a personal loan is best for small expenses.
As Top10PersonalLoans.com explains, “A personal loan is an amount of money loaned to a borrower by a lender and is usually unsecured.” The main appeal is their flexibility (which is what makes them useful in small business situations). The key is to choose a good lender with competitive rates and terms.
Keep Payables Up to Date
Make it a priority to regularly review your accounts payable schedule to ensure you’re keeping up with all of your credit obligations. This will prevent bills from slipping through the cracks, which can hurt your credit score and/or reputation with business partners.
Be Smart With Invoicing
Smart invoicing is an underrated aspect of healthy small business money management. With the right invoicing strategy, you can get your bills to the top of your client’s stack. This leads you to get paid faster and on-time.
Establish Effective Credit Policies
It may be part of your business strategy to extend credit to clients, but this should be something that you give a lot of thought and scrutiny to.
If you extend credit, establish an effective policy with clear terms, stipulations, and limitations on whom you’ll work with. Otherwise, you can dig a deep pit.
Hire A CPA
When you’re really small, you can do most of your accounting on your own. But as you grow, accounting becomes more of a full-time job. It’s at this point that you should carefully consider hiring a CPA or small business accountant to come on staff. If nothing else, outsource it to a qualified accountant nearby.
Putting It All Together
Smart money management won’t guarantee successful business results, but it will prevent you from waking up one morning and finding your company in financial ruin. Over time, all of the smart decisions you make will create a strong foundation that gives your business the best chance of experiencing sustainable growth. Dig in and do your best to make good choices for today, tomorrow, and the future.