There are 30.7 million small businesses in America. To say that America is built off small businesses would be an understatement. Without these small businesses, the economy would be in ruins and many people would be without jobs. As a small business owner, you must learn money managing strategies that will allow you to navigate through even the more difficult times.
Continue reading this article for the best small business money management tips.
1. Create a Cash Flow Budget
A cash flow budget allows you to keep on track with your finances each month. You’ll be able to pay your bills without worrying and still have money left over at the end of the month.
If you don’t have a cash flow budget yet, you’re flying by the seat of your pants and hoping everything shakes out at the end of the month. If you’re living this way, you’re likely stressed to the max and worried until you see how your accounts look at the end of the month.
You need to do things like making forecasts of how much money you’ll have coming in and where it is coming from as well as how much money is going out and where it is going.
As your plans for your business changes, make sure to update your cash flow budget to reflect those changes.
2. Know What Will Impact Your Cash Flow
Even if you don’t change anything on your side of things, some things can impact your cash flow. If a vendor you buy something from increases their prices, if your overhead goes up, or similar things take place, you might find yourself with a different cash flow situation than the last month.
Knowing the things that can change what your cash flow looks like will allow you to hope for the best and plan for the worst-case scenarios.
If you aren’t good at calculating cash flow and making predictions, you might want to bring a professional in to look at these things. Getting these wrong could cause your business to go under during a tough month.
3. Use Smart Strategies for Managing Receivables
Are you using a hope strategy for people to pay you what they owe you? While the honor system might sound good in theory, that’s not the best way to do business. Doing things this way makes it near impossible to track what is happening in your business and makes it likely for accounts to fall through the cracks.
You need to create clear terms for the people that owe your business money by establishing effective credit policies. One of the things you can do is offer an incentive for people to pay their bills quickly, or charge interest on their account after a certain period, so you can keep your cash flow going each month.
Don’t get too greedy with the late fees and interest because some of these accounts might turn into write-offs vs. sources of additional income.
4. Stay On Top of Your Payables
If you aren’t paying your accounts on time, you might be getting hit with late fees and interest charges. Staying on top of your accounts payable will allow you to decrease unnecessary expenditures.
Make sure you have a system that allows you to see who you owe and if you’re on time or late.
5. Keep An Eye on Where You’re Spending
There are some months when you might not stick to your budget as closely as you should. If you add a new service like managed IT services, you might forget to add it to your budget.
No matter what your budget says, always review what you’re spending to see if you’re keeping on track with your budget. Reviewing things when you get into trouble isn’t a good strategy, so make sure you’re keeping an eye on things even when they are going well.
6. Understand How to Use Credit
You might need to use debt to get your business up and running or for other expenses that you can handle otherwise. Depending on your plans for your business, your specific business, and the debts you already have, you may consider different types of debt.
There are many options from term loans, lines of credit, and more. Look at your options and get advice on which one is the best for your situation.
7. Don’t Hoard Surplus Cash Flow
If your business has a lot of money on hand, that can give you peace of mind. While peace of mind is good, if you have too much money on hand, you might be hurting your ability to grow.
Instead of letting money stay in an account, you should put it to work. Yes, you need to have an emergency fund and you don’t want to overextend your business account, but you should focus on growth, which means spending money to make money.
Look at past patterns for your company’s cash flow and see if there are any signs that you need to keep more money during certain times of the year. If you see any patterns that concern you, keep more money in the accounts to protect your business from harm.
Becoming a Pro at Money Managing for Your Small Business
Now that you know more about money managing for your small business, it’s time to put these tips into action. Learning and implementing smart business money management will allow you to keep your business alive and well even in the most difficult times.
Do you want to learn more about managing your business, finance, and other vital topics? Keep reading our blog for more.