For your small business to succeed in a very competitive and challenging market, it is important to have the skills, knowledge, and love for what you do. But to ensure the growth and profitability of the business, you also have to be financially smart and great at handling your small business’ financial aspect.
It is often that small businesses do not grow or they experience financial hardship, which limits their ability to cater to more customers because of their dire financial situation. Missed growth opportunities due to financial reasons is a common problem in small businesses. This is why it is also important to get financial management skills along the way when managing your small business. However, you can start learning on your own right here, right now. Below are a few money management tips for your small business.
Organize Your Bill Payment System
Business owners can get very busy, especially in the beginning of their business, when they are just starting to establish their business’ name and are still adjusting to their competition. This can take a while and one of the tasks that often gets less prioritized is the payment of bills.
Paying bills or, worse, missing the due date are small things that can add more financial burden to businesses. Many business owners seek help paying bills and keeping up with the processes to avoid financial burdens. Missed payments on loans, credit cards, and business partners or suppliers can easily put your business credentials and credibility in question, too. Not to mention that added late fees can also compound and add stress to your financial situation.
To get a better knowledge of how much your payables are, it is best to start organizing your payment system. Make a detailed document on excel that lists of all your bills and when their due dates are. Set it in the calendar and add a reminder so you will never miss paying another bill.
You can do the same for your receivables. If you are owed by your customers, you can make an invoice template in Google Docs format and automate the process of sending it when they are due to be paid. This way, your customers are also reminded of their bills.
Separate Your Personal Money And Business Money
Separating your personal money from your business money is not just beneficial for your business, it is beneficial for you as well. Having separate accounts can make the monitoring of your business expenses and income easier. Your accountant will be thankful since reconciling your books with your bank statements are made much easier if there is a separate account purely for business use. To begin separating your finances, differentiate business expense categories from personal cost categories.
This way, your personal money cannot be confused for your business money and prevents you from continuously injecting your money into your business. It can also prevent you from taking business money for your personal use. Strict compliance to this rule can give you a better knowledge of your business’ financial status, one that is separate from your personal financial status.
Get A Better Deal Out Of Your Contracts
It is a common practice for businesses to enter into contracts with their suppliers and other partners to set the terms of their partnership. Often, businesses enter into these contracts without asking themselves if this is the best for them and their business.
The truth is, you can actually save money by learning the contents of the contract and negotiating it to get a better deal for yourself. For example, extending the grace period from 30 days to 60 days already gets you a discount on late fees. So next time, read that contract and learn to negotiate and get the best deal.
Set Aside An Emergency Fund
Just like in your personal life, it is important to save for use during emergency situations. It is the same with business. You never know what or when a natural or man-made calamity will strike that can affect your business. So, it is best to prepare for it as early as possible. Finding emergency funds can be difficult if you wait too long. Set yourself up for success by starting to save now. You can set aside a certain percent of your monthly profit and allocate it for your emergency fund. This money can help you get back on your feet when an emergency strikes.
Budget Your Expenses
Businesses have lots of expenses and, sometimes, we don’t really monitor all of them. For example, a business lunch with a partner or a coffee run with the staff while at work are expenses that we don’t really mind spending on since they don’t really cost that much. However, adding all these small expenses can be costly. So next time, set a budget for these petty expenses and stick to it. That way, you can put a limit on the small expenses and keep it manageable.
Money management is an essential financial skill for every entrepreneur and it is worth learning more of it as you go along the business, or even before you start operating your business. Knowledge in the financial management aspect of your business will help you succeed against the hurdles you will go through and fast-track the growth of your business.