by Sean Price, community manager at RightSwitch. He has a passion for web design and user experience and when not working enjoys rugby, cycling and swimming.
Financial management can be quite daunting, particularly for new business owners. Being cognisant about the financial state of your business is essential if you want it to keep it profitable in the long-term. Below you will find a list of six very useful tips that I have compiled so that you can start enhancing your business right away and avoid unforeseen financial problems in the future.
1.Keep a separate business bank account. The first piece of advice I have for you is to ensure that ‘personal’ and the ‘business’ do not mix. By separating the two, you will find it much easier to keep track of the finances of both, particularly in relation to income and expenditures.
By not differentiating them you risk running into unforeseen tax-related problems or even hard-to-explain losses. It is quite useful, for example, to get a business credit card to use strictly for expenses related to your company.
2.Don’t forget to monitor income and expenditures. If this sounds like common sense to you, remember that it is not quite so common. Income and expenditures are the keys to your business’ financial performance.
Always remember to keep track of your money’s movements and your company’s financial performance compared to previous financial years. Keep an eye on your most important clients and most profitable services as these are what you’ll want to focus and spend the most time on. In terms of expenditures, be on the lookout for hidden fees and other penalties.
3.Cut costs. There are endless ways to cut a small business’ costs, and this mostly depends on what sort of business you operate. The main takeaway from this point is that you should find the delicate balance between being frugal with your expenditures while at the same time ensuring customer satisfaction consistency.
If you’re saving up for a business mortgage, you could use a business mortgage calculator to see what the long-term picture looks like.
4.Have a good billing strategy. Having an effective and dynamic billing strategy is critical for your business. There are many ways of setting up a billing process – so as long as you are consistent with how you do this, there shouldn’t be too many problems.
You should take measures that ensure that whether you have two or a hundred clients, the billing process remains consistent and uniform for all of them. Automation may be useful for this step as it will save you some money. You may also look into going paperless, as it could also save you money and make it easier to keep track of your billing and invoicing.
5.Have a budget. Budgeting is an essential tool that will help you keep track of your business finances. As I mentioned earlier, you are going to have to keep track of your income and expenditures, as well as making a medium to long-term financial plan so that you don’t just run out of money or into other trouble.
To do this, you could start off with a simple budget template or you could use a budget calculator. Either way, make sure you have a plan – even the best business people can’t get away with winging their finances.
6.Set up good financial habits. This is very important, particularly in the long term – and it applies to life in general, not just the business world. Essentially all of the advice on this list could be considered steps for cultivating good financial habits.
The key to forming them is to implement them repeatedly into your ‘business routine’ – otherwise, if you are erratic or forgetful, they just won’t stick. So, be consistent with the actions you take to improve your business, and by doing so you will notice that over time – it may take months or even years – you will make marginal improvements that will eventually add up and make an incredible difference.
Starting and running a small business, particularly at the initial stages, can be quite an intimidating challenge. The advice on this list includes some of the basic knowledge you will need in order to start enhancing your company and making some of those marginal improvements that will garner results in the long-term.
I believe the most important takeaway here to be consistency – if you are consistent with what you do – even if it’s something as small as regularly checking on your finances, you will see positive results. Keep it up over an extended period of time and who knows where you’ll get. Good luck!