Keeping your business finances healthy is crucial for business growth and success. However, as an SME it’s not always easy to keep your finances in order or keep track of your financial information throughout the year and as your business grows.
The simple truth is, the more informed you are of your company’s finances and the better your money management practices, the less likely your business is to fail. When you’re running a small business, you have to maintain a good understanding of where your business is financially, not just from a success and growth perspective but in terms of legal compliance.
Here we’ll explore some simple ways you can manage your small business finances effectively.
Keep your personal finances in check
Understanding what’s happening with your business accounts can only be achieved once you have a stronger grasp of your personal finances. Having separate accounts is a must to improve clarity, reduce confusion and maintain clear, concise records of your expenses, income and your tax responsibilities.
If you have an ISA or other investment accounts, then it’s crucial that you keep these accounts separate from your business finances. Check out wealthify.com for the latest information on investment ISAs. Having a personal ISA could be a simple and effective way to build money for your yearly tax payments, saving you from the panic of sourcing the money further down the line and using your savings to fund future business projects.
Ensure your billing strategy is clear
Getting repeat business is great, but when clients forget to pay, it can cause all kinds of issues for your business and it means you have to make some awkward phone calls. To protect your growth and your business finances, ensure that your billing strategy is crystal clear and that all terms of payment are communicated before, during and after any transaction. Keep your invoices looking smart, and clear and make it as easy as possible for clients to pay. Automated invoices with options to pay online are a great place to start.
Consistently review your costs
Running a business means lots of little expenses, unfortunately, all these expenses quickly add up. Failing to monitor your business costs will quickly lead to a financial disaster, slowing your business progress and even leaving you with debt. Regularly review your costs and expenses to see where you can make savings and where you can cut costs altogether.
One useful way to keep track of expenses as a small business is to be smart and use electronic or automated processes where possible. This can include electronic invoicing, using online banking, and even using fuel cards to ensure you can track fuel costs more effectively. By automating more, you will be able to monitor outgoings more easily which will help to save money.
Remember to pay yourself
Many small business owners neglect to pay themselves. This is usually because they’d rather put everything into the daily running of their business. However, overlooking your role in the company means setting aside a consistent amount of money each month, compensating yourself for work completed and also covering your business in case of a financial emergency. If the business doesn’t work out, then at least you will have accrued some earnings to move on with.
If you’re a small business owner, it’s vital that you take the steps above to take care of your business finances. Careful monitoring of your accounts and income means more room for growth and long term success.