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Be More Profitable With These Small Business Finance 101 Tips
Be More Profitable With These Small Business Finance 101 Tips
It’s cliched, but true: many companies fail because they fail to plan. Keeping your business going means understanding the financial fundamentals of entrepreneurship, which are much more complex than many new business owners think. If you’re feeling a little overwhelmed by all of it, consider this free Small Business Finance 101 course.
Focus on the flow
Criticism is king, and you likely watched a lot of it fly out the door while you were setting up your business and putting things right. It’s time to get it back. Create an efficient invoicing system early so that your customers receive invoices immediately, and don’t be afraid to ask for your money. Giving customers 90 days to pay is generous, but your cash flow needs may require faster payments. Shortening your term to the next 30 days may help you get cash faster, and a slight discount can be offered for early payment. If a customer’s account is overdue, send a notification and try to pick up.
Now that you have cash coming in, keep an eye on it. Create a report that tells you how much cash you have, how much you expect to put in, and how much you have to pay for expenses. Write it down on paper and look at it closely. Doing so will show you if you have an upcoming cash shortage and give you time to do something about it.
If you see a shortfall coming, try to spread the word about your business and be sure to follow up on any and all potential clients. Contact prospects back in time, increase your advertising budget, get a loan or consider making a sale. Do what you have to to get cash in your account and customers in the door before a period of slow cash flow creates a problem.
Budget, budget, budget
We will not lie – budget is boring. This is probably one of your least favorite things to do, but it’s absolutely necessary that you do it anyway. Budgeting is the cornerstone of Small Business Finance 101. Write down your budget and then follow through.
Keep track of all your expenses in your budget, from employee payroll to your new photocopier to the snacks you save in the break room. If you spend it, keep track of it. This accomplishes several things. First, comparing your upcoming expenses with your projected cash flow is another way to spot potential cash flow problems. Writing it all down also helps you remember upcoming expenses that you don’t incur often, such as your company’s car repair bill.
Are things feeling a little tight? Looking at your budget in black and white can help you find expenses to cut. The opposite is also true, because seeing it all on paper might also make it easier to spot a good opportunity to buy that new laptop or a customer management software package.
Understand your tax picture
Depending on how you structure your operation, your business tax bill may be the one you pay in person at the end of the year. Many small businesses operate as passing entities, which means that the business owner is personally responsible for the company’s taxes. Not understanding this and preparing for it appropriately throughout the year can lead to a major surprise at tax time.
Even though your budget may be tight, don’t skimp when it comes to tax planning. Accounting software can do wonders for keeping track of your bookkeeping and your finances, but the best tax and financial planning decisions are made with the help of real, true CPAs on top of current tax laws and strategies. In the long run, a good CPA can save you a lot more than their services will cost you.
There are, of course, a large number of other things you can learn about small business finances, and over time you are likely to pick up a few of them. But these are the building blocks of a solid financial foundation. You can achieve everything you wish for once you know how much money your budget requires and how much money you get. Understanding your taxes is the thing that can help you save money and avoid any unpleasant entanglements with Uncle Sam. When you’re ready and your money allows, reach out and let us help you grow your business with software to fix your business listings, social media, reputation management, professional website design, and more.