Did you know that 82% of small businesses don’t survive their cash flow issues? In other words, attracting new customers and making sales is sometimes not enough for you to grow your business.
To survive in this highly competitive entrepreneurial landscape, you need to learn how to manage your money properly. Most importantly, you need to build a solid financial infrastructure.
This way, you will have an insight into your financial health, set achievable goals, make data-backed business decisions, and avoid the most common mistakes small businesses make.
That said, here is a list of a few simple tips you may find useful when optimizing your business’ finances.
Separate Personal and Business Bank Accounts
When starting a business, one of the most common mistakes people make is using the same bank account for both their private and corporate needs. Even though this option seems faster and more reliable to you right now, this is not so.
First, it will make your bookkeeping efforts more difficult, since you won’t be able to separate your personal transactions from professional ones. Second, paying taxes will become a true nightmare. Third, by opening a separate account for your business, you will look more professional to both your employees and your clients. Most importantly, you will have a clear insight into all your transactions and be able to build your financial management strategy on raw data rather than guesswork.
Don’t be Afraid to Scale Down your Ideas
Sometimes, to stay ahead of the curve, you will have to scale down your plans a bit. But, this doesn’t mean that you’re giving up on your initial ideas. On the contrary, this means that you’re tailoring your business according to its financial health and industry requirements.
For example, if you’ve just started a business, you won’t need to book a fancy office or hire 50+ workers. To boost your liquidity, you should consider outsourcing your workflow to remote employees. Luckily, with the expansion of cloud storage providers, office collaboration tools, and IM platforms, the members of your team will be able to communicate in real-time and share massive amounts of data instantly, irrespective of their time zone and location.
At the same time, you are given a chance to manage and monitor their tasks, as well as save a lot of money. Statistics highlight that outsourcing workflow can help companies save on up to $11.000 a year.
Automate your Accounting
Handling finances may seem simpler than it really is. Namely, you need to learn not only how to save your money, but also how to spend it wisely. For starters, you have to monitor where your every single dollar is going or coming from. And, to do so, you need to have an extensive experience in accounting, be able to read your financial statements, and know how to manage your taxes, invoices, bills, and salaries.
If you cannot do this on your own, don’t be disappointed. We’re living in the era of brilliant and yet affordable IT solutions and you should harness their power to simplify your financial management. For example, you could go with a recurring payment system that will help you monitor your finances on a single dashboard, collect invaluable business performance data, and automate your recurring payment collection. Most importantly, with the help of tools like these, you will manage to keep track of your transactions in real-time and create a solid financial management strategy.
Still, once your business starts flourishing and your accounting efforts become more complex, you should consider hiring a full-stack accountant to manage your finances and give you actionable tips.
Pay your Taxes
Paying taxes is an immensely important aspect of managing your business finances. Logically, your tax returns will depend on the type of business you’re running. For instance, the majority of businesses need to pay an annual tax on their profit, which is called an income tax. If your business owns real property, then you will have to remit a property tax. Additionally, in some states, you will also have to pay sales taxes for services and goods sold.
Now, to make sure you will be able to pay your taxes on time and avoid putting your business at risk, you should save your money on time. Also, consider keeping a tax payment schedule to make sure all of your important taxes are paid on time.
Analyze your Business’ Financial Health
The only way to stay profitable is to monitor and measure your company’s financial performance. Your main aim is to see whether your business is performing at an expected level. And, one of the most effective ways to do so is to use cloud-based accounting software.
Any reliable accounting software makes it easy to set clear, realistic goals. It will provide you with a detailed financial history, helping you track your company’s progress and plan ahead. By being familiar with your past inflow and outflow patterns, you will be able to set achievable business milestones.
Let’s say you’re not satisfied with your sales and you want to increase them by selling 20% more products than last year. By analyzing last year’s sales, you can figure out how exactly you need to sell to reach your goals.
Back to You
Handling business finances is extremely difficult and, if not done properly, it may jeopardize the growth of your entire business.
So, use accounting software to automate your financial management and keep track of all major KPIs.
Go the extra mile in separating your personal and corporate finances and make sure you pay your taxes regularly.
Always try to tailor your goals to your financial health.
Hope these tips will help you succeed in doing so. And, if you notice that, despite all your efforts, your business is still underperforming, you should consult a pro.