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How to improve small business financial management

How to improve small business financial management

As a Small business owner, there is no gainsaying that there is always something that needs to be done. Managing finances can be quite challenging given all the obstacles the owner faces in the business environment, especially when it comes to small businesses. While it is important to enjoy your profit, it can be chaotic to overlook or not channel attention to more pressing business issues. Small firms run the economic helm of affairs and I am not even talking about the low-key-relegated effects on any economy. They do this in the process of industrialization, employment generation, sustainable economic growth, encouragement of entrepreneurship; reduction of poverty and ultimately, contribution to gross domestic products(GDP), not forgetting the personal fulfillment that comes with watching your business thrive and having control of your income and finances. Now, as mentioned earlier, managing finances can be challenging and that is why I came up with these spectacularly cool and easy ways to put that difficulty to rest for good. Get some cup of water; sit back; relax; because this could be that article you have been waiting to read all your life.

Do not Mix Business with Personal Pleasure: This one of the most important points every small business owner needs to know. The truth is, at some point, you will be tempted to dip your hands into the money you have set aside for business to settle some personal issues. While you can defend the reasons behind this, according to research, a lot of small businesses have suffered because of this. Although this usually involves financial discipline, one easy way to this is to separate your business and personal budgets. This will enable you clearly differentiate which fund is for pleasure which is strictly for business.

Separate Banking Accounts: One of the clearest ways to follow the first point above is opening separate bank accounts for your various funds. Do not make the mistake of using your personal account as the same account for your business financials. I will be blunt here; it’s foolhardy to have business transactions flowing through your personal accounts and vice-versa. Although it is a prerequisite if your business is strategically positioned as an LCC or a corporation, but it’s imperative even if you are a sole proprietor. Opening a business account not only makes you more accountable and organized, it clearly defines which account you cannot just touch anyhow. Also, opening a business account opens you up to a lot of financial opportunities. You can easily request for loans, get support and bid for contracts.

Do not forget to Pay Yourself: You are your own employee and you also deserve to get paid. As a small business owner, it is always essential to set a salary scale for yourself. This at least curbs the temptation of dipping your hands into the funds meant for business. You deserve to get paid for your work, pay yourself. This is also a way of testing how good your business is doing. You know how much profit you have made and can strategically channel to appropriate units as require.

Maintain a Frugal Business Attitude: Cash flow can be really attractive and intoxicating especially when your small business is doing really well. This is where most owners falter; the profits get to their heads and the spendthrift in them is awakened by default. Even though you pay yourself, avoid getting sucked up in the benefit of the business and your progress. Businesses can be topsy-turvy, it is not all rosy a hundred percent of the time. Set your salary margin as low as possible and satisfy the sustainability of your business first. Income saved now will give you a chance at flexibility on rainy days.

Employ the Use of Accounting Program or Software: This saves a ton of troubles associated with organizing. Sure you could keep everything in a spreadsheet but that might get clunky overtime. Technology has made everything easy. There are lots of software you can leverage on to help organize you daily transactions and ultimately, control your financials. Needless to say, before you decide on an accounting program keep in mind the needs of your business. Some things to consider include; What kind of financial reports are therein? Staff strength and employees in relation to payroll processing system. Do you need to send invoices? And so on and so forth, depending on your line of products or services.

Be a Member of Business Association Groups: This factor, although has been largely ignored in this part of the world for a while now, is among the most important on this list. First of all, being a member of a small business association group helps you build profitable business network. You meet people, you meet potential clients and have the opportunity to learn about business development. Secondly, most small business groups promote financial management in several ways. Some run programs they compulsorily save monthly. You also have easy access to loan and a flexible payment structure in settings like this. Since the group is a clique of small business owners, you will find it easy to relate and potentially learn more on financial management.

ALSO READ : How to grow a small business

Do Not Ignore Managerial Planning: This entails more than just finances. Inventory planning, Pricing practices, performance evaluation, personnel planning, marketing planning and a host of other factors which small business owners tend to overlook are key to improving your finances. As much as you keep your eyes peeled on these, don’t go big on business cards, marketing materials discounts, cars or inventory before any substantial revenue comes in. This can lead to or create cash flow blockage and put you in a very compromising situation.

Limit How Much and How often you Borrow: Do we still need to emphasize the importance of this? Another factor we have noticed that dampens small business these days is debt. As a small business owner, even if you need to borrow at all, do not borrow more than what you can comfortably pay back. Also, do not borrow when you really don’t need to. When applying for loans, consider the payment interest on the loan and be sure the payment structure is dynamic and comfortable enough for you and your business. As much as possible, avoid borrowing when you don’t need to.

Set Out Time to Stay Organized: A lot of persons recommend scheduling about 15 to 60 minutes per week to keep finances organized. This depends, to a large extent, on your situation and kind of business. This is usually overlooked but it is also very vital, this tip entails reviewing financial reports, reconciling bank statements, invoicing, paying utility bills, and so on. To serve as a reminder, get sticky notes, alarms, To-do-lists, note pads, etc. The point is; treat it as a priority. Personally, I set aside half a day, twice a month to update business and personal records and so on. I reward myself with a chilled glass of homemade smoothie (trust me, rewarding yourself for every task accomplished can be a real confidence booster) when I’m certain nothing is amiss. Systematic and organized finances are essential. The absence of it will ultimately plunge you into despair because you cannot determine if your business is making profit or not and no business owner wants that. These tips cannot only help you stay on top of your small business finances, they also serve as a guideline to establish a system that works for you. Finally, the last ingredient to stay afloat in your business endeavors is DISCIPLINE. Yeah, sounds Cliché right? But that is the red pill, so take it.