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17 tips to manage your small business finances

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Want to get finances under control in your small business?

Knowing the state of your financial affairs back to front is one of the best ways to make sure the cash keeps flowing. Staying on top of your finances means you can avoid unforeseen business debt and have enough money to invest in and grow your business.

Stay on top of the day-to-day money management

  1. Properly manage your accounting. You can hire a good bookkeeper or purchase DIY accounting software. It is crucial that you keep accurate track of your income and costs.
  2. Review your costs. Keep track of all of your small business expenses. These can add up quickly, but reviewing them allows you to fine-tune where your money goes.
  3. Make financial projections. Having clear financial projections is important. Your main business plan will help you to anticipate and address possible future obstacles.
  4. Don’t get slack on invoicing.
      • Send out invoices as soon as possible after providing goods or services.
      • Set payment terms of seven days to make sure that payments are not forgotten or lost in the process.
      • Always follow up on sent invoices. You can make this easy by creating set templates for email or SMS follow-ups.
      • Reference invoice numbers and cross-reference these with payments.

Need a cash advance on outstanding invoices? See what options are available

Separate business, pleasure and private accounts

  1. Keep a separate business bank account. Mixing business money with your personal finances is a recipe for unexplained losses and tax-headaches. Keeping your business’s money separate will make gauging profitability easier and help you to keep proper track of your expenses.
  2. Keep track of personal loans to your business. Keep accurate records of what you loan to your business. When your business starts making money, you can easily pay back the director’s loan first before paying tax on the remaining profit.
  3. Make sure to pay yourself first. This doesn’t mean sucking up all the profit the moment you make it; start with 10% of the earnings. This is a good way to set aside money consistently and to test the profitability of your business. It also provides a safety net for unexpected expenses.
  4. Remain frugal. Even though you pay yourself, don’t get sucked up in the benefits of business ownership even if you can afford it. Set your salary as low as possible and offer government-mandated benefits only. What you save now will give you more flexibility in future lean months.
  5. Keep traveling costs minimal. Most hotel and travel costs should be spent on a place to simply lay your head at night and a way to get from meeting to meeting. Don’t overspend on luxurious travel and accommodation. This sets a bad precedent to employees and can be an unnecessarily large cost with little return. Plan your business trips as if you were paying for them yourself.

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Take care of the bigger business issues

  1. Don’t let legal fees get out of hand. A reasonable amount to pay per hour for legal services is $450. How can you manage this cost?
      • Make your expectations clear to your lawyer when procuring their services.
      • Choose the billing option that is the most cost-effective for your business, for example, hourly or per project.
      • Ask whether it is possible to defer payment until the project is funded.
  1. For the more simple necessities, consider DIY legal documents. There are various kinds available online.
  2. Take care when expanding. Make sure expansion is done steadily and wisely. Pushing large amounts of money into expansions that are too quick and too drastic can be disastrous.
  3. Take control of your own marketing and public relations. Follow a PR and marketing strategy to make sure efforts are intentional and focused.
  4. Consider renting instead of buying. Leasing equipment instead of buying helps you avoid maintenance costs and can also prevent you from overpaying on equipment only needed for a specific period of time. You could also consider renting your office space, as it makes relocation and expansion easier.
  5. Don’t wait too long before seeking a loan. An easy mistake to make is waiting until your business is in financial trouble before applying for loans or other credit. This is exactly when you will be least likely to receive financing. Consider applying for a business loan when your financials are still in a good state. This way the loan can be used for expansion or as an emergency line of credit instead of rescue.
  6. Make sure you have enough capital. Small businesses tend not to have enough capital to get themselves through the startup phase. To prevent this, have three months’ living expenses saved plus the amount you are expecting to need for the first three months’ business expenses. Plan as if you expect to receive no business revenue.
  7. Don’t spend prematurely. Don’t go big on business cards, sign writing, marketing materials, cars or inventory before any actual revenue comes in. This can create a cash flow blockage.
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12 Responses

  1. Default Gravatar
    CharlesOctober 8, 2018

    I want to set up a business please how do I come up with the business plan

    • finder Customer Care
      johnbasanesOctober 11, 2018Staff

      Hi Charles,

      Thank you for leaving a question.

      You may want to do a feasibility test first prior to creating a plan for your business. A feasibility study is an analysis used in measuring the ability and likelihood to complete a project successfully including all relevant factors. It must account for factors that affect it such as economic, technological, legal and scheduling factors. Project managers use feasibility studies to determine potential positive and negative outcomes of a project before investing a considerable amount of time and money into it. Hope this helps!

      Cheers,
      Reggie

  2. Default Gravatar
    IdreesOctober 7, 2018

    I am interested in setting up a business and require advice on how to develop a good and profitable business plan.

    • finder Customer Care
      JoshuaOctober 7, 2018Staff

      Hi Idrees,

      Thanks for getting in touch with finder. I hope all is well with you. :)

      There are just a lot of things you need to consider when you set up a business. A few pointers would include determining if there’s a market for your products or services, how much money you need to start your business and do you have enough money to sustain it until you get a meaningful income, the location of your business, the legal requirements and implications of setting up a business, and others.

      It would be a good idea to do your own research. If possible, consult with an expert in your field or observe how other businesses accomplish their goals. By doing so, you should be able to improve the profitability of your business.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Joshua

  3. Default Gravatar
    ScottSeptember 27, 2018

    I have been doing business for almost 4 years now, i dont even know if i am making profit or lost. this may sound strenge to you.

    • finder Customer Care
      johnbasanesSeptember 28, 2018Staff

      Hi Scott,

      Thank you for leaving a question.

      You may check our 1st tip which may help you in accounting for your profit vs loss ratio.

      1. Properly manage your accounting. You can hire a good bookkeeper or purchase DIY accounting software. It is crucial that you keep accurate track of your income and costs.

      A book keeper or at least a good journal of the daily income and expenses would help you a long way. Hope this helps you.

      Cheers,
      Reggie

  4. Default Gravatar
    TomSeptember 25, 2018

    I’m having trouble balancing rent money, profit and up keep, please help.

    • finder Customer Care
      nikkiangcoSeptember 25, 2018Staff

      Hi Tom,

      Thanks for your inquiry and for visiting our page.

      I understand that it’s hard to manage expenses especially if there’s more expenses than money coming in. Keep yourself in check by minimizing expenses and just spend on things you need. Stick with a budget and make sure you keep some for savings as well.

      The information above is a complete guide on how you can manage your finances wisely.

      Hope this helps. Feel free to message us should you have further questions.

      Best regards,

      Nikki

  5. Default Gravatar
    WilfredAugust 25, 2018

    Is it beneficial to save money in a bank whilst running a business with a loan or you should finish paying before saving

    • finder Customer Care
      johnbasanesAugust 29, 2018Staff

      Hi Wilfred,

      Thank you for leaving an interesting question.

      There are different factors that you need to look into before doing one or the other. But one thing that you need to check is the profitability of your business. Ensure that you always make the necessary payments to your loans monthly and have them done on time. The excess that you have on top of this can either go either way, you may put that in a savings account for it to earn interest each month or add it to your loan payment to lower down your principal balance more and lower down the interest rate of the loan since the loan percentage is dependent on the principal amount balance. Hope this helps!

      Cheers,
      Reggie

  6. Default Gravatar
    EmmanceJuly 29, 2018

    how best can one plan and execute business expansion plan?

    • finder Customer Care
      JoshuaAugust 7, 2018Staff

      Hi Emmance,

      Thanks for getting in touch with finder. I hope all is well with you. :)

      That’s an interesting question that begs a detailed answer. However, let me just give you a general answer.

      To execute business expansion plan, one must consider the different factors that directly and indirectly affect your business. You need to take into account your budget, market, and future trends of your customers’ behavior.

      You may want to read more articles and books on this topic to learn more.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Joshua

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