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As a small business owner, you’re no stranger to wearing multiple hats, but managing your finances reigns supreme. If you’re eyeing growth and success, understanding your finances is non-negotiable – think of money as the fuel to your business engine.
10 tips for smarter small business finances
It is important that you track and manage income and expenses regularly for the most up-to-date financial information of your business, although not every entrepreneur is equipped with great financial management skills or trained in small business finances. If you are new to small business finance, here the top 10 practical tips to keep your small business afloat.
Invest in latest technology
Invest in modern technology to streamline your financial management. Manual tracking of important documents like balance sheets and income statements can be overwhelming. Thankfully, there are excellent accounting software options available. These platforms simplify bookkeeping, invoicing, payroll, and reporting, improving accuracy, reducing costs, and saving time.
Consider using cash flow management and forecasting tools like Forwardly. With AI and machine learning capabilities, it syncs with your accounting software to provide real-time insights into your business’s financial health. You’ll gain a clear understanding of cash flow, performance metrics, and historical KPIs, empowering you to make informed decisions and reshape your financial standing.
Never mix personal with business banking
As a small business owner, it can be alluring to mingle your personal and banking finances. It may seem convenient, but it can lead to messy records and missed opportunities. Keep them separate for clearer tracking, easier accounting, and cleaner tax audits. Here’s how:
- Apply for an employer identification number/EIN
- Open a business bank account
- Establish your business entity type
- Get a business credit card
- Pay yourself a salary
- Organize your business files
- Seek advice from financial professionals.
Invest in financial education
Invest in your financial education for better business management. Understand key concepts like cash flow statements and balance sheets. Learn about overdue payments and how they affect your business’s credit rating. Start with the basics of small business accounting and finance, focusing on reading financial statements.
Here’s how to improve your financial literacy:
- Familiarize yourself with common accounting terms
- Utilize resources from the U.S. Government like Treasury.gov and MyMoney.gov
- Read the financial section of newspapers
- Explore online resources
- Invest in financial books
- Learn from personal and peer experiences
- Seek advice from experts in the field.
Hire a business advisor
Consider bringing on a business advisor when navigating tricky financial waters. Whether you opt for a bookkeeper, an accountant, or a CPA, these experts offer tailored advice to suit your business needs. They can help identify problem areas, manage assets, cut costs, handle tax filings, and free up time for critical decisions and growth.
Don’t overlook the importance of monitoring your business expenses, especially in the early stages. Keep a close eye on spending daily, weekly, and monthly to stay on top of your financial situation. Planning for big expenses like rent and payroll can help maintain positive cash flow, even during tough times.
Monitor business expenses
Consider bringing on a business advisor when navigating tricky financial waters. Whether you opt for a bookkeeper, an accountant, or a CPA, these experts offer tailored advice to suit your business needs. They can help identify problem areas, manage assets, cut costs, handle tax filings, and free up time for critical decisions and growth.
Don’t overlook the importance of monitoring your business expenses, especially in the early stages. Keep a close eye on spending daily, weekly, and monthly to stay on top of your financial situation. Planning for big expenses like rent and payroll can help maintain positive cash flow, even during tough times. Remember to open a business bank account, choose your accounting method, stay diligent with recording expenses, and organize receipts.
Stay on top of invoicing
Stay on top of invoicing to maintain a healthy cash flow and manage small business finances efficiently. Send invoices promptly and use a quality invoicing system for streamlined payments. Keep invoice payment terms clear and offer early payment discounts. Send invoices to decision-makers and payment handlers, and politely remind them about payments. Don’t stick to traditional payment methods instead provide faster and simpler payment options like instant payments. You can also consider adding overdue fees to discourage late payments.
Pay your business bills on time
Paying your business bills on time is vital to keep things running smoothly and build trust with your vendors. Whether it’s due to cash flow hiccups, forgetfulness, or negotiations, missing payments can lead to extra costs and strained relationships. Just like managing your personal finances, staying on top of invoice payments is crucial.
With modern payment solutions like Forwardly, you can make bill payments effortlessly with just a click, thanks to the accounts payable automation feature. Consider setting up automatic payments for added convenience. Find a system that works best for you to stay organized and efficient in handling your business finances. Trust us, it’ll save you a lot of stress and headaches down the line.
Maintain a positive cash flow
Maintaining a positive cash flow is key to keeping your small business thriving. While focusing on building your brand and increasing sales is important, ensuring a steady stream of cash is equally vital. Without enough funds, balancing day-to-day spending and revenue becomes tricky, affecting your business’s growth.
If you’re spending more than you’re earning, it’s time to rethink your cash flow strategy. Keep a tight grip on expenses and ensure you have enough cash for accounts payable. Even if you’re expecting big payments from outstanding invoices, watch out for operational costs eating into your profits. Use cash flow management strategies tailored for small businesses to avoid relying on interest-bearing accounts to cover bills.
Design an emergency fund
Establishing an emergency fund is crucial for your small business. It ensures you’re prepared for unexpected expenses and uncertainties, such as overdue invoices or debt payments. Financial experts recommend saving at least six months of net living expenses to cover off-season periods and critical times. With an emergency fund in place, you’ll have peace of mind and the financial flexibility to manage your business expenses effectively.
Pay your taxes on time
Pay your taxes on time to avoid trouble with the IRS and state tax authorities. Late payments can result in hefty penalties, especially for payroll taxes. Stay on top of income, sales, and property taxes, and use a payroll service to keep quarterly taxes up-to-date. If quarterly instalments are challenging, consider switching to monthly payments to manage charges effectively.
Starting thinking Forwardly
Think the Forwardly way when managing your small business. Running your small business is thrilling, but it can be tough, especially when finances get tricky. If you’re struggling to keep things in order, consider these tips and team up with Forwardly.
Forwardly makes handling accounts receivable and payable a breeze. With B2B payments processed in just 22 seconds, getting paid is quick and hassle-free. Plus, instant payments cost only 1% (with a minimum of $1 and a maximum of $10 per transaction), and sending bill payments is completely free. Best of all, there are no subscription fees with Forwardly. So, let Forwardly simplify your financial management and take your SMB to the next level.
Experience the ease of Forwardly for yourself with our 30-second product tour here!
