Almost every article about small business success warns you of the dangers of failing. While it’s true that nearly 50 percent of all small businesses fail in the first five years, it doesn’t mean you need to run your business like it’s on life support.
However, to avoid becoming another statistic, you should learn some small business financial management skills. After all, most of the small businesses that aren’t successful fail because they don’t make enough money to account for their costs.
If you want to learn how to manage money for your business, keep reading for our top tips.
Track Your Cash Flow
One of the most important aspects of staying on top of your business’s finances is learning how to monitor and document your cash flow. Tracking your profits every month helps you identify any positive or negative trends in your business.
Tracking your spending each month keeps you aware of your costs. It’s vital to know not only how much money is being spent, but how it’s being spent. This will also be a helpful small business financial management skill when it comes time to do taxes.
Create a Budget for Everything
Now that you’ve documented every incoming and outgoing dollar, you need to create a budget for the business. Hopefully, tracking the cash flow served to enlighten you where money was being wasted. Using this information, you can cut back in certain areas to apply for the money where it will better serve your company.
Creating a budget and sticking to it is important for limiting unnecessary spending and keeping your business operating in the black. Determine some conservative amounts for your monthly costs, such as marketing, life insurance for business owners, building costs, salaries, services, etc.
Keep Your Personal and Professional Finances Separate
Next, if you haven’t already, you must separate your personal funds from your business funds. Keeping everything in the same account can make filing taxes incredibly complicated and messy.
You need to have a separate checking and savings business account to streamline your finances. This also makes it much easier to document your cash flow.
Responsible business money management means adopting frugal spending habits. While there is some truth to the saying that you need to spend money to make money, you also don’t need to run your business into the ground.
For example, you need to make sure your products and services are of high quality and that your employees are fairly compensated. However, you don’t need top of the line equipment and supplies, especially right out of the gate. As a small business owner, it’s important to keep your overhead as low as possible.
Know When to Ask for Help
Finally, know when you’re in over your head. Regardless of if you lack the time, skills, or inclination to manage your finances, it still needs to get done.
If you must, invest in a professional financial manager or advisor. You may also need to hire an accountant or bookkeeper to help you keep track of your cash flow.
Looking for More Information on Small Business Financial Management?
We understand how complicated small business financial management is. That’s why we dedicate a large number of our articles to covering small business topics. If you’re looking for more information or advice, be sure to check out some of our other articles before you go.
Interesting related article: “What is Financial Management?”