The Ultimate Guide to Managing Your Finances as a Small Business Owner
The world of business ownership is a risky one, filled with ups and downs that you probably didn’t anticipate when you signed on the dotted line. You’ll be faced with challenging situations on a regular basis, but there are ways to make things simpler for yourself.
For example, managing your finances well and keeping track of how much money you have coming in and going out is a good start.
If you don’t know where your money is going, how can you expect to reach your goals? The stress that comes with running your own business can make it easy to lose track of things, these tips will help you stay on top of things from day one.
Track All of Your Income and Outcomes
When starting to keep tabs on your finances, the first thing you have to do is track your income. This includes any regular source of income as well as one-off payments that come your way.
One-off payments are things like insurance claims, a payment for a single product, or even that check you get every year from Aunt Sally for your birthday.
Keeping track of your income is about more than just writing down how much cash you’ve received; it’s also about noting what it was for.
For example, if you received payment from a client for a business membership, note what the payment was for and when you are expected to get paid again.
This allows you to track your cash flow effectively and make sure you’re not losing money unnecessarily.
Set Financial Goals for Your Business
Financial goals help you stay focused on the future by providing you with a roadmap you can use to keep your eyes on the prize.
With so much to think about on a daily basis, it can be easy to lose sight of your long-term goals. One of the best things you can do is to sit down and create financial goals for your business - What do you want to do with your business? Where do you want to be in the next one to five years?
Focusing on your long-term goals is especially important if you’re in a start-up phase. Entrepreneurs often make the mistake of only looking in a short-term perspective, this is a huge mistake. Once your business is up and running, it will be much harder to change its direction. Setting financial goals for your business will help you to think long-term and keep on the path to success.
Keep an Eye on Your Cash Flow
When you’re trying to keep track of your business finances, one of the most important factors to pay attention to is your cash flow.
What is cash flow? It’s the amount of money that comes in and goes out of your business on a regular basis.
In order to track your cash flow, you have to know where your money is coming from and where it’s going. Keep track of all your revenue and note the date on which you are expected to get paid again. You can then track your expenses to see if you have enough money coming in to cover your expenses and pay your bills.
Keep in mind that things are likely to change from month to month, so stay flexible and don’t try to force things to fit into a strict schedule.
Don’t Forget About Taxes
As fun as it is to think about how much money your business is going to make, it’s important to remember that you’re also going to have to pay taxes on it. Keep tabs on what you’ll owe in taxes and when you expect to pay them.
You may also be able to deduct certain expenses from your taxes, so make sure you’re being as thorough as possible when it comes to managing them. Keep track of any deductions that you’re entitled to and the amount that you’ll have to pay.
Check-in With a Financial Advisor
Once you’ve been in business for a while, you might want to consider bringing in an outside financial advisor.
You probably know your business inside and out, but an advisor can help you to look at things from another perspective. A financial advisor might be able to provide you with a different view on how things are progressing and how you might be able to make improvements.
Unfortunately, financial advisors aren’t free. You’ll have to pay for their services, but you can usually choose how much you want to pay and when.
Think of it as an investment into your business, but also to yourself. Well managed finances will allow you to focus on other important aspects of your business and grant you peace of mind, which you can't put a price on.
When it comes to managing your finances, there are really three things you have to do: track your income, set financial goals and keep an eye on your cash flow.
Once you’ve mastered these basic skills, you’ll be able to grow your business and reach new heights. You can also use these skills to help other small business owners who are just getting started.