EA - Small Business Tips - How to Manage Your Money

Small Business Tips: How to Manage Your Money

The ultimate goal of running a business is to not only offer quality products and services, but also maximize profits at the same time. Even if you understand your ideal customer and have a great marketing strategy in place, your business will fail if you don’t know how to manage your money. Money management will make or break your company, which is why you need to be intentional about the way you are structuring your finances.

Freedom Through Money Management

Too often, people feel like money management is another to-do item that needs to be added to a never-ending list of responsibilities. How can you keep up with the books when you are worried about business development, employee reviews, customer service, and more?

The truth is that a good money management system actually frees up your time, allowing you to focus on other tasks within the company. When you are using the right software, paired with an experienced outsourced accounting team, you don’t have to focus your effort on busy work and tax calculations.

Learning how to manage your money gives you the freedom to run your business in the best way possible. You always have a clear picture of your accounts, including both income and liabilities. This information optimizes the business decisions you make each day, which has a domino effect on improving your long-term results.

Money Management Doesn’t Have to be Overwhelming

If you don’t know much about finances or money management, then you likely feel overwhelmed at the idea of implementing a new system. This process doesn’t need to be complicated. Instead of trying to reinvent the wheel, you should lean on the advice offered by an experienced accounting team.

Your accountant can do the heavy-lifting to design and implement a new financial system for money management. Then, you simply need to learn the right way to use this system to support your financial goals.

Be Proactive in the Way You Manage Your Money

The key is to take a proactive approach in the way you choose to manage your money. Instead of always stressing over immediate bills and trying to “put out fires” in your bank account, you need to be thinking ahead and anticipating the upcoming costs.

For example, sometimes business owners make the mistake of spending money that is available in the bank account, when that cash should have been set aside for an upcoming tax bill. Even though the money is in the account right now, it doesn’t mean that it can be used for extra expenses or a new project. It is important that you consider your cash flow and have a specific system in place, so the money is saved and ready to go when the payments come up in the future.

Being proactive means that you aren’t making decisions based on a quick, limited snapshot of your current bank account. Instead, you are evaluating financial trends, looking at the way the cash usually flows through your account, and preparing for unexpected things that might come up in the future.

How to Improve Your Money Management Strategies

Here are a few simple steps you can follow to improve the systems you are using to manage your money. While these tips are geared for business money management, don’t overlook the benefits you can enjoy by also applying these tips in your personal finances as well.

  • Debt Evaluation: It is difficult to keep a business going without good debt, but the debt burden can become too heavy and eventually take down the company. How much debt are you carrying right now? What are your debt ratios? If the credit cards and lines of credit are creeping up, then it means that you are spending more than you are bringing in. Look for ways that you can cut costs, so you have more cash to pay down the credit lines as quickly as possible. Not only are these accounts demanding cash flow each month, but the balances are going up due to interest costs and fees.
  • Cut Unnecessary Costs: Take a real, honest look at how you are spending your money to find ways that you can reduce unnecessary line items. Don’t underestimate the power of trimming your expenses. Even the smallest monthly costs can add up over time, resulting in hundreds or thousands of dollars spent over the course of a year. Sometimes you can reduce unnecessary costs, such as switching service providers or eliminating monthly subscriptions that aren’t being used. Go through your expenses line-by-line and consider the value each expense is bringing to your company. Then cut anything that isn’t contributing to your business goals so that you can reduce your spending.
  • Create a Rainy-Day Fund: It is normal for all businesses to have busy and slow seasons. When sales are up and the cash is flowing, it is the perfect time to ensure that you are ready for the rainy days that are sure to come in the future. Creating an emergency fund means that you will be prepared if something goes wrong with a product shipment or you are facing repair work on your building. Having a 6-month emergency fund will give you peace of mind to know that you are prepared for whatever might happen in the future.
  • Separate Business and Personal Expenses: It’s easy to let the personal spending get mixed in with business expenses. Unfortunately, things get complicated if you don’t have a clear line drawn with your accounts. Make sure you have separate accounts and credit cards. Be deliberate in the way expenses are paid so that your bank statements are accurate in reflecting the money spent on the business. If you have disorganized records, then it means that you could be missing tax deductions and potential business growth opportunities in the future.
  • Purchases and Inventory Timing: When big expenses are coming up, such as inventory restocking, consider the way you can time the purchases to ensure there is enough money in the bank. For example, if you can avoid restocking inventory in the same month that a tax payment is due, then it helps to balance out your cash flow for the month. Don’t tie your cash up in too much inventory that just sits on the shelf and collects dust throughout the year.
  • Set Financial Goals: These goals need to be realistic and achievable. How much do you think you can bring in this year? What are your anticipated costs? Design a budget based on these financial goals. Remember to be conservative in your estimates so you have room for mistakes and issues that might pop up. Not only do you need to work through the numbers, but you also need to be sure that you have action steps to follow that will support future growth.
  • Don’t Miss Payments: Even when cash flow is tight, it is important to make sure that you are keeping up with all payments. Your budget and emergency fund will help by ensuring that you have money available when the bills are due. Be strategic and determined never to miss a payment! It might seem like a small thing to be late on a payment, but you need to consider the consequences that can occur if you aren’t diligent about payments that are owed. For example, missing vendor payments means that they might not be willing to work with you in the future, which could potentially hurt your ability to provide the products your customers desire. Additionally, on-time payments help you avoid costs due to late fees and interest expenses.
  • Ongoing Financial Strategy: After reviewing your current financial situation, the next step is to ensure that you have a plan in place so you are prepared for the future. This ongoing financial strategy should include details such as the use of a good accounting software, services from an experienced accountant, and daily/weekly/monthly tasks, so you don’t fall behind on your financial tracking and reporting. The easiest way to ensure that you are consistent you’re your financial strategy is by enlisting the services of an outsourced accounting team that offers full services throughout the year.

It’s never too early to get started on your new financial strategy. If you are struggling with money management, then the first step is to talk to an accounting team for assistance. Don’t be embarrassed about the current state of your business finances. Instead, be willing to ask for help so that you can improve your results and ensure that you are prepared for the future.

Talk to the Small Business Accounting Pros

Easier Accounting is leading the industry with personalized tax services for small business owners. We understand the challenges you are facing with cash flow, profit margins, and other financial aspects of running a company. You don’t need to carry the responsibility without support from an experienced, knowledgeable team. For more information about the quality outsourced accounting services that are offered, you are welcome to call us at any time: (888) 620-0770.

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