Best Small Business Finance Management Strategies
Starting a small business can be both extremely difficult, and reassuringly rewarding. But managing what many consider to be the financial minutia, such as the capital, assets, losses, debts, and liabilities can be draining. You can have superior knowledge in your industry or a strategic or competitive advantage, but if accounting isn’t your strong suit, you could be accidentally running your business slowly into the ground. Most small business owners use out-of-the-box software for many aspects of their business, and many also hire accountants, but learning to integrate a little bit of accountability into every decision you make as the owner can have a big effect on your bottom line. Following the best small business finance management tips can help your small business keep its focus on doing what it does best, and make it less stressful for you to manage the books come reporting time.
Finance management is the process of planning, organizing, and controlling financial activities in a way that allows for greater business success and return on investment. It covers effective bookkeeping, making accurate projections, accessing business finance, and creating financial statements.
The Best Small Business Finance Tips for Your Business
1. Keep an Updated Balance Sheet
You want to know where you are coming from, where you are and where you are headed with your business. Having an updated balance sheet helps to understand the nexus between your income and expenses to maintain profitability. You can also track assets, liabilities, and equity with an up-to-date balance sheet.
2. Pay Yourself
It can be very tempting to continuously pour back the profit into the business without making any plans for yourself or future business needs. However, you are a worker just like everyone else in the business: most small business owners still need to be paid in the early days of running their companies.
3. Adopt an Accounting Method
Another crucial part of small business finance management is bookkeeping. You can use either the cash or accrual method to record purchases made. The accrual method can help cut down taxes but can be more complex to manage and can give false figures on money available to the business. The cash method shows cash flow and is easier to understand. However, it limits the predictive value and long-term clarity.
4. Adjust Your Pay Strategy
In a recent study done by Harvard and MIT, it was revealed that cutting your pay period from 30 days to 15 days can actually help increase earnings, be able to hire more people and pay those people more. Of course, each industry is different, and each company’s strategy is going to reflect its needs, employee type, and schedules. A business that has more hourly employees than full-time salaried employees can optimize its pay periods differently than a business with only salaried employees. So, do your research.
If bookkeeping really isn’t your strong suit, then get accounting help. It is one thing to manage a business effectively, but a whole other ball game to try to pick up the nuances of small business finance management if it’s not your strength. If you think you need help, then look into our free business systems audit. AMB Performance Group offers business coaching tailored to your specific business needs. Contact us to get ahead of financial management problems and for more small business finance tips.