Running a business is no easy task. You’re likely to run into challenges and difficulties along the way. One of the main challenges is managing your finances. If you are not careful about money, you could easily run out and end up having to rely on your personal finances or less than stellar borrowing to make up the difference. 

If you’re a small business owner looking to set financial goals, refine your business finances, and improve performance, here are some best practices you should consider. 

1. Always Know Your Numbers

When managing a business, you need to have a detailed list of all your expenses. It will allow you to set a budget. Then, you will need to use this budget to guide you so you don’t spend money on expenses you can’t cover and end up racking up more debt. To ensure business success, you need to have a clear understanding of your overhead costs. It is the only way that you can keep your finances in order.

To get started, you have to create a spreadsheet and/or use your accounting software. This will enable you to organize your financial records so you can account for investments, funding, business loans, accounts payable, bank overdraft facilities, and just about everything else you spend money on. On top of being able to keep an eye on spending, you’ll have the foundation you need to determine your return on investment and the profits generated for any given period. 

As there are plenty of tools available for creating spreadsheets, you have nothing to worry about. Some great options include Google Sheets and Microsoft Excel, which are both available for free. You can also use a dedicated app on your smartphone to review your expenses daily and stay on top of all your business finances.

2. Turn to Social Media

Instead of having to sign up for a course on business finance, you can simplify the process and save money by following experienced and respected entrepreneurs on social media. There is a lot that you can learn from those who’ve forged paths ahead of us.

You can also use social media to learn about and communicate with your customers, giving you a clearer picture of their needs and desires. This helps you market more effectively and creates new opportunities for growth and innovation. 

3. Check Your Overhead Expenses

Something else you need to keep an eye on are your overhead expenses. You need to be ready to make necessary changes whenever necessary to keep your expenses under control. This is only possible when you know what to expect. You have to make comparisons to previous weeks, months, or even years to stay ahead. Moreover, it’s imperative that you keep your receipts and invoices for tax season. The last thing you want is to scramble for the right documents at the last moment.

You can give yourself the training you need by reading detailed how-to books, subscribing to financial websites, taking classes online or in-person, or asking someone to teach you. 

There are bound to be areas where you can cut costs, put your resources to better use and find alternatives for more expensive resources. You will have to consider everything, including the services, equipment, programs, subscriptions, and supplies you pay for. Try to find better terms for insurance policies, bank accounts with less or no fees, and deals on bulk buys for repeat items, to improve your finances. As for larger expenses, you should be able to opt for deferred or periodic payments. This will leave you with more cash.

4. Recover Outstanding Payments, Sell Unused Assets, and Consolidate Debt

When it comes to managing your cash flow, unpaid invoices can cause a great deal of trouble. In fact, they can take a toll on your business credit score, which only makes your debt more expensive. If you are unable to collect payments, you might want to work with a debt collection agency. Besides this, you can send regular reminders to your debtors to remind them of their commitments. Similarly, you have to ensure that the terms and conditions of sales agreements are clear about overdue payments and all other stipulations to help those who owe you money manage their ongoing payments successfully. 

To further improve your business finances, you should go through every asset you own. Determine which ones are redundant, not providing enough for what you spend on them, or just sitting around unused. You can always sell these unnecessary resources to people who really need them. This will provide you with immediate cash. If you plan on paying for storage costs, it might be best to get rid of unwanted assets so that you can save money by cutting down on the size of the rental space. 

You also have to take a look at your existing business debt. If you have taken on considerable debt, think about consolidating it and shifting high interest debt to lower interest accounts. Bad debt has a way of cutting into the plans we have for growth and expansion. Monthly payments can eat our income alive. Look for better credit options, consolidation opportunities, low-interest loans to pay off high-interest ones, and do what you can to minimize taking on unreasonable debt. 

5. Seek Help

Lastly, you should consider getting help with your finances. You’re a great manager; but with everything on your plate, there is only so much you can handle. Partnering with experienced bookkeepers and financial managers can make all the difference. Even though you’ll need to spend money on hiring outside help, the benefits far outweigh the cost. 

You’ll be able to benefit from their experience, which helps you avoid costly errors. In fact, your bookkeeper can act as a coach and point you in the right direction on key money decisions, implement better payroll systems, and make the most of new opportunities. 

Conclusion

Managing your finances closely is an integral part of your long-term growth plan. Prioritizing money and resource management solidifies your business in the market, helps you avoid mistakes, makes your organization more attractive to great talent, and strengthens your relationship with your customers. 

Sound Accounts helps business owners strengthen their business and create new opportunities with individually tailored bookkeeping service plans. Connect with us today to learn more. 

To learn more about improving your finances, see our frequently asked questions below. 

FAQ

How can I improve my business finances?

If you are looking to improve your finances, here are some tips:

Look out for redundant and underused resources 

Build up your savings 

Create an investment strategy and implement it

Set a realistic monthly budget 

Pay all your bills on time each month

Keep track of every aspect of your spending 

Consolidate debt

Focus on better marketing strategies

Improve customer experience

Partner with a bookkeeper

What Are The 5 Principles Of Money Management?

The following principles of money management will allow you to improve your business finances in no time.

• Time is of immense value
• Risk needs to be compensated
• Information is necessary when making a decision
• Markets determine prices as well as the allocation of resources
• Stability is crucial for ensuring that your business is successful

How can I manage my finances when I feel overwhelmed?

Turn to experienced bookkeepers and financial managers to help you create and implement a comprehensive plan for every aspect of your finances. Read the most respected books on financial management for business owners, take a few classes, and make your finances a top priority instead of an afterthought.