Small business owners wear many hats. They play the role of manager, bookkeeper, HR, marketer and more. But among all of the many tasks small business owners are in charge of, managing finances is one of the most important.
Without proper money management, a small business can go under in a matter of weeks. Setting goals, creating a strategy and setting aside time for money management is key.
Here are four tips to better manage your small business finances.
1. Manage, Review and Project
There are three money-management tasks that should be at the top of your must-do list: manage, review and project.
First, it’s important to properly manage your accounting. Either hire a bookkeeper, or use DIY accounting software to manage your income and expenses. It is crucial to keep accurate track of your incoming and outgoing cash.
Expenses should be reviewed regularly, and costs should be cut whenever possible and necessary. Reducing or eliminating unnecessary expenses will increase your profits and improve your cash flow.
It’s also important to have clear financial projections. You can use your business plan to anticipate and tackle any potential future obstacles that you may foresee.
2. Don’t Slack on Invoicing
Don’t procrastinate when it comes to sending out invoices. Send them out as soon as possible after providing customers with goods and/or services.
Make sure that your payment terms are clear, so no invoices are lost or forgotten in the process. Follow up on any invoices that you’ve sent. You can do this by creating email templates or SMS messages.
To keep things organized, reference invoice numbers, and cross-reference with payments.
3. Plan Your Tax Payments
As a small business owner, it’s your responsibility to pay your taxes – and to pay them on time. You can’t get out of paying your taxes, and you can avoid paying extra fines and penalties if you pay on time.
State and Federal taxes have long been recognized as a necessary means of income that guarantees the economic, social, and political stability of the nation. You have a responsibility as a business owner to contribute to the economic and social stability of your community and country.
If you’re having difficulty making quarterly payments, break your taxes down into monthly payments instead. This way, you can treat it like any other operating expense.
4. Separate Business and Personal Expenses
Mixing business and personal finances is never a good idea. It can be tricky to justify your business expense write-offs if you have personal expenses folded into the mix. Intermingling the two will only cause unnecessary tax headaches.
To help keep things separate, make sure that you pay yourself. Keep all of your personal expenses separate and pay for them using separate accounts. While it’s important to pay yourself, it’s also important to make sure that you don’t go overboard. Many experts recommend setting your salary as low as possible. This will ensure that you have the funds to keep running during lean months.