If you have a small business, managing finances can be tricky. Whether you’re just starting, looking to grow your business, or creating a positive cash flow, owning and running a small business can be hard work. It’s important to monitor your finances to know what’s coming in and going out. Here are five financial tips for small businesses.
1. Separate Personal and Business Finances
Your business’s finances should not mix with your finances; having a clear separation is good. It’s not only confusing, but it can cause you to make poor financial decisions. Ensure your business expenses and revenue are accurately divided between separate bank accounts and that your small business banking account has enough funding to run the business effectively. And if you struggle with figuring out what goes where hire an accountant to help you arrange things correctly.
2. Build Business Credit Score
An important part of a healthy small business has a good credit score. If your business handles its credit, it’s essential to have a high credit score. You can help your rating by paying off all your small business expenses and keeping your business’s debt in check.
3. Pay Yourself
This is also a personal finance tip; you’ll want to ensure you have enough money to cover your expenses and savings. You don’t have to take the full amount of your profit, but at least ensure you’re taking enough to cover your bills and savings. If you don’t pay yourself in time, you may find that your business isn’t sustainable. Also, paying yourself a salary helps you manage your money better, encouraging you to be more efficient with your spending.
4. Create a Reasonable Budget
Your budget will vary depending on your business, but if you’re starting, it’s best to start with a reasonable budget. It would be best to have a budget worksheet with a monthly statement to keep track of your finances in a simple, logical way. You can use your spreadsheet to know if you’re paying yourself enough and how much you need for each department of the business. In addition, you can use your budget worksheet to decide if you want to expand your business, hire employees or pursue any other goals.
5. Don’t Be Afraid of Loans
One of the reasons many small businesses don’t grow as quickly as they would like is that they’re afraid to ask for loans. Don’t be afraid if you need to borrow money to get your business off the ground or expand. Borrowing money may make you feel vulnerable, but it’s necessary to run a small business. If you apply for a business loan and are approved, you’ll still be responsible for keeping your loan payments current. Make sure you have a plan if you borrow money to ensure the business is sustainable. And if you start feeling overwhelmed, don’t be afraid to take some time off or hire an accountant to help manage your business’s finances.
Conclusion
Taking control of your finances is an important part of business ownership. The tips above will help you manage your money to ensure your business runs on sound financial footing.
