Unlike large corporations, small businesses can be risky and competitive but also malleable.
Given this, you might have to deal with lots of problems and administrative work, all of which will require your focus and attention. Part of this is knowing how to manage your finances and money well.
If you’re a small business, here are some financial tips you can consider to manage your money and finances better.
With small businesses, it can be straightforward to mix up personal and business expenses. However, since you are already reading this, you won’t make the same mistake novice entrepreneurs often do. Mixing those two together will create a multitude of problems in your accounting records, taxes, and liabilities.
Maintain a clear distinction between your personal and business expenses so as not to mix them up. One of the ways you can do this is to have separate credit cards—a corporate credit card and a personal credit card. All your personal expenses go to your personal card, and all your business expenses go to your corporate credit card.
There will be a lot of administrative tasks that accompany starting a small business. To spend minimal time in administrative duties and help you pay attention to running your business; instead, you need to invest in technology. For example, you can invest in software like Wave to make invoicing more convenient and time-efficient for you.
When you have a small business, it’s still crucial that you pay your bills and taxes on time. Little delays in payment will cause you to pay unnecessary penalty fees that will eat into your revenue and income. These bills include your corporate credit card, utility, vendor, and contractor bills.
To avoid this, you can make calendar reminders alert you when it’s time to pay your bills. This is just one of the ways you can remind yourself to pay on time.
Similar to your personal finances, you must also practice frugality when it comes to the expenses in your small business. At times, there can be unnecessary expenses or costs that you can try to bring down. This will make a ton of difference in your bottom line.
To do this, you can start reviewing all your operational expenses, including but not limited to, the following:
Once you do a scrutinized review of your expenses, you’ll see where you spend the highest and where you need to reduce, budget, or adjust.
For example, if your utilities hold a large chunk of your expenses, you can lower this down by turning off the aircon once it’s 5 pm. You can also encourage employees to turn off the lights when they’re not in use. To lower down office supplies expenses, you can even start going paperless and transferring everything digitally. In addition, this will also protect your important documents in case of a fire.
On the other hand, to lower down the costs of goods sold, you can start negotiating with suppliers for a lower price. Most especially if you have a long relationship and good credit with the supplier, you have more leverage to get lower prices.
Although insurance might seem like an additional expense, you will be thankful to have it when something happens. You’ll never know if a tragedy or emergency will hit your business, so you should be prepared for anything.
Getting insurance will provide you with peace of mind in case a calamity or problem strikes. For example, in case there’s a fire in your building, your insurance will cover expenses for rebuilding your office. On the other hand, if one of your agent’s cars gets into an accident, your coverage will also be able to cover the expenses for repair.
Because you’re running a small business, buying equipment might not always be the best idea. Because money will be tight, leasing out equipment compared to buying it will help lower down your cost, manage your cash flow, and properly allocate your funds. The funds that were supposedly used for purchasing equipment can be used to make your business bigger instead.
Having a small business doesn’t only entail monetary capital and ideas; it will also require you to find sustainable ways to keep your finances in check. Preparing your finances and managing it well bears as much importance as your business and marketing plans.
Once you follow these tips, you will be able to make better decisions when it comes to your finances.