If you have recently established a small business or become a business owner for the first time, you may be wondering how to manage your business finances from the very onset and protect yourself and your brand from a number of common financial risks.
It can sound overwhelming, and even frightening, if you are an inexperienced business owner but by familiarizing yourself with the right tips and tricks ahead of time, you can become a money management whizz and, perhaps most importantly, prevent your business from falling victim to financial ruin.
If you are curious as to how to manage your business finances, continue reading to find out everything you could ever want or need to know.
Plan ahead
It may sound extremely cliché but as a business owner, you should be accustomed to planning ahead and, therefore, know exactly how to do so when it comes to managing your business finances.
If you are struggling to know where to begin, however, it may benefit you to try budgeting, forecasting, accounting, tax planning, and risk managing.
It can allow you to establish a suitable financial plan that can guide you and your business finances going forward and prevent you from exceeding any pre-established budgets or tapping into any emergency savings funds.
It may sound time-consuming, but it should be a fundamental step in your journey towards managing your business finances and mastering the art of money management at the earliest convenience as opposed to at the last available second.
It may also benefit you to analyse your business accounts and financial statements on an ongoing basis to allow you to gain insight into how your business is performing month to month.
Establish a Separate Business Account
If you have only recently become a business owner, it may be worth establishing a separate business account ahead of time.
It can allow you to differentiate between your personal and professional transactions and monitor and track your entire incomings and outgoings from the second you launch your business.
In advance of establishing a separate business account, it may also benefit you to do whatever it takes to boost your credit score to improve the chances of your business account thriving.
If you have ever found yourself wondering “does paying the minimum hurt your credit score?”, for example, Tally can provide you with all of the answers you need to any question or query that may be on your mind.
It also makes complete financial sense considering the fact that most banks will not, in fact, allow you to use a personal account during the process of establishing a business.
Stay on Top of Deadlines
If your daily business operations involve tight targets, staying on top of deadlines can allow you to manage your business finances.
If you are unsure of when any business loan or credit card payments are due, for example, you may find yourself in a sticky financial situation if you become unable to pay bills on time or in full due to a lack of foresight or money management skills.
In addition, this may also leave you vulnerable to late fees or added interest which can negatively impact your business finances for years to come, sever your professional relationships, and even render you high-risk amongst lenders.
In order to avoid these unnecessary payments, you must stay on top of your deadlines from the very onset by making a note of when both minor and major payments are due and setting reminders if and when necessary.
This can prevent you from falling behind with your business finances and, in the worst possible scenario, being forced to abandon your business due to a lack of funds or confidence in your business’s ability to succeed on a long-term basis.
If you are struggling to stay on top of deadlines and feel as if you have exhausted your options, establishing a payment schedule may be a viable option for you.
Monitor and Track Your Spending
It can be easy to disregard any impulsive purchases as business expenses, but this is a slippery slope and can result in you draining your business account in a matter of months or becoming crippled by business-related debts.
In order to prevent these problems from materialising, you must monitor and track your spending on an ongoing basis.
If you are completely unaware of how much money you spend on a daily, weekly, or monthly basis, for example, it may be time to monitor and track your spending going forward.
It can protect you from racking up bills you no longer want or need and may even lead to misuse of funds in the long run.
This is especially important if you own several business accounts including a checking account, savings account, and credit card account as this can make it difficult to generate a rough ballpark figure of how much you are withdrawing and spending on a regular basis.
Time Your Purchases Accordingly
In order to avoid periods of little to no cash flow, you must time your purchases accordingly and avoid making impulse or unnecessary purchases that you have not factored into your daily, weekly, or monthly budget.
It may also benefit you to prioritise any bills or invoices that must be paid and wait until you have a disposable income until you splash out on any luxury or unnecessary purchases.
If you have established a separate business account, it may also benefit you to time your purchases accordingly in an attempt to decrease your tax liability with any tax-deductible products purchased towards the end of the year usually able to be claimed on your tax return.
If you have recently established a small business or become a business owner, you must know how to manage your business finances ahead of time.
In order to do so, you must plan ahead, establish a separate business account, stay on top of deadlines, monitor and track your spending, and, last but not least, time your purchases accordingly.
Jonathon Spire
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