31 Aug 9 Financial Tips to Keep Your Business Afloat
Love them or hate them, finances are an important part of running your small business. From forecasting cash flow to handling credit, small business financial planning is something savvy business owners know can’t be ignored. But where should you start?
Whether it’s setting financial goals or educating yourself on ways to successfully manage your money, the road to success is paved by knowing the right way to balance the bank.
Here are some tips to point you in the right direction:
1. Educate Yourself
Curiosity is one of the defining factors of a successful entrepreneur; without curiosity you’ll find yourself working in circles. And one of the best ways to keep yourself out of this rut is to continuously explore new areas of your business.
In other words: never stop learning.
Educating yourself can also save you money. For example, consider paying someone to teach you a skill, rather than continually hiring them to do it for you. This will help you save on repeat expenses. Of course, you can’t do everything, so it’s important to invest in outside help when it’s necessary. But spending a portion of your budget on training can help save a lot of cash in the long run.
At the very least, you’ll want to have a basic grasp of your business’ financial statements. Even if your SimpleKeep bookkeeping team manages your books for you, you’ll still want to try your hand at learning to read each of these statements to better understand your business.
What Are Financial Statements?
These statements list your business’ financial activities. The common ones are income statement (sometimes called profit and loss statement or P&L) and balance sheet. These statements can be used to monitor your profits, making sure your company is sustainable. You’ll also use them to keep your business’ debt in check, as well as monitor specific revenues and expenses. Think of your financial statements as a tool that helps you make smart financial decisions.
This financial statement will show your company’s financial performance over a specific period of time. Your income statements will compare your revenues and expenses, providing you with your net income or loss. This statement can help you answer questions such as:
- How much revenue did the company generate in Q1?
- Which service is more profitable?
- How much does the company spend on payroll each month?
This is a record of your business’ assets (bank accounts, furniture, equipment, etc.), liabilities, and equity. Think of your balance sheet as a snapshot of how your business is doing financially, at a particular point in time. When reviewing your balance sheet, you may notice that your total assets equal the combination of debt and equity. Essentially, Assets = Liabilities + Equity. You can use your balance sheet to answer questions such as:
- How much did the business have in the bank on August 1?
- What is my current loan balance?
- Are we still waiting on some clients to make payments? If so, how much?
2. When in Doubt Hire Professional Help
While learning skills can save your company money, it’s important to understand that, at some point, it may make sense to delegate to someone who has the experience and know-how to get it done. Hiring competent professionals can actually save you money, just by keeping you from being stretched too thin. When you take on too much, you’re incapable of functioning at full capacity.
“Consider delegation as an investment, not an expense,” advises Chairman of Sledge & Company.“[It] enables you to devote more of your precious time into your core pursuit.”
Sometimes it takes a whole group of people working together to keep a business healthy and thriving. From finances to legal council, investing the time and money into finding good help can be worth its weight in gold. Make sure your business is connected with good legal and accounting help you’re confident can get the job done.
3. Embrace Technology
Technology has opened up new avenues for small business owners to not only start a business, but to thrive financially. Whether you’re a one-person show or a group striving to change the way people do business, leveraging technology can be one of the most helpful and cost-effective ways to take your business to the next level.
The good news is that you can start today by automating your bookkeeping or accepting online payments. There are numerous ways to start saving and organizing. Check out these posts for ideas on saving money and automating your bookkeeping.
4. Set Financial Goals
No matter the size of your company, it’s important to have a direction in mind when you’re managing your small business’ financial planning. Having financial goals will help you align your spending, grow, and make financial decisions (such as purchasing and hiring).
If your financial goals include increasing revenue, make sure to cover these three areas:
Review your Pricing Strategies:
Prices, like most other aspects of a small business, should be regularly examined so that they line up with your business structure and financial goals. Consider what the demand is, what your customers are willing to pay, and whether overall costs have changed.
Expand your Distribution Channels:
What are your strongest distribution channels? Should you be investing more time on social media in order to reach your target market? Or perhaps direct marketing is a better way to reach your ideal clients? Analyze your marketing and explore different avenues to ensure you’re reaching your target market efficiently.
Diversify your Offerings:
Diversifying your offerings simply means coming up with new ways to reach your customers. Whether that means pursuing new online opportunities, thinking about co-selling with complimentary products or services, or simply analyzing growth trends so you can see where they lead; taking note of these opportunities will help you reach your goals.
On the flip-side, it’s also important to cut down costs. Try these tips to get back on track:
Tackle Your Debts:
Achieving your financial goals means making smart decisions about how you spend money, including payments to eliminate debt. If your cash flow will allow, paying off loans quickly can not only save you from having to make long-term payments, but can also help maintain your credibility with lenders. Having an idea of your overall debt will allow you to decide whether or not you should take on additional debt to fund projects or expansions.
If you’re looking for ways to responsibly handle your debt, contact a professional, by either reaching out to your current accountant or someone here, at SimpleKeep, in order to see what your options are for borrowing money. Simple steps, such as changing your lender, can sometimes make a big difference when it comes to managing your company’s debt.
Check for Unnecessary Expenses:
Keep your business on the straight-and-narrow by making sure that unnecessary expenses are in check. Check to make sure you’re using subscriptions you’re paying for, and that you’re getting the best price on things like your wifi. From getting your product or service to your customer, to running your finances, monitoring your expenses will keep you from overspending, and will help you reach your goals faster.
When you’re checking your unnecessary expenses, it’s also a good idea for you to make sure that you’re getting the best price on services and products you’re paying for. Don’t hesitate to look for other creative ways to pay, including negotiating prices, or even trying your hand at bartering. Whether you’re offering a physical product or a service, there more companies than you may think who are willing to trade services.
Reduce Inefficiency With Automation:
You might also find that some of the best ways to save include automating some of your daily processes. Automation saves you time and, in many cases, helps you to maintain a more efficient workflow. Head over to our blog post for ideas on ways to automate your business.
5. Monitor Performance
Cash flow, the amount of money coming in and out your business, is one of the most important things to focus on.
Carefully managing your cash flow will help you make business decisions, such as which direction to take your business and when. Whether that means moving into a new location, hiring new employees, or simply investing money into new technology, it’s important that you confirm whether you have the cash flow to support these decisions.
That being said, use your cash flow knowledge to create a reserve. Having this cash in the bank will not only give you peace of mind, but you’ll be ready if any investment opportunities arise that will benefit your business.
6. Focus on Sales and Marketing
You can be the most efficient business in the world, but if no one knows you exist, it will be pretty hard to turn that efficiency into profit. Invest some time in building a strong marketing plan that will help you build a powerful presence.
Other than increasing sales, making it easy for customers to find you will also allow you to build a culture around your service or product that you may not be tapping into. Creating this culture will help you bring customers back repeatedly.
If you’re still on the fence about whether marketing and finance can walk hand-in-hand, consider this:
- Balance is Key:
Collaborative and accurate budget planning are two pillars to making a successful marketing plan, make sure that both the marketing and the financial side of your business are successfully working together so that both can be more flexible and overall stronger.
- Share and Compare:
Marketing costs money. But that’s only one side of the story. It’s important for you to have the data to show which marketing strategies are contributing to the success of your business. When you’re planning, this will also help you figure out why you need amounts of money, and what you can expect from spending it.
- Hold Yourself Accountable:
Remember that part of keeping up with your finances means altering your behaviors after you go over them. If your numbers don’t line up be sure to take the time to strategize on how to fix them, moving forward.
7. Don’t Procrastinate on Your Taxes
If there’s one thing we hear time and time again from small business owners, it’s that not keeping track of your taxes is a mistake. Procrastinating on taxes can not only result in higher stress, but it can leave you feeling drained when you’re trying to move forward. An easy solution to this problem is for you to keep your books up-to-date, so you aren’t scrambling last minute to pull them all together.
8. Chase the Money You’re Owed
It’s also important for you to collect the money your company is owed. Not only because you should maintain professionalism with your transactions, but because having consistency with your payment records, cash flow, and profits is an important part of keeping your business healthy. And in order to do this, you need to ensure that there’s a healthy flow of money coming in.
One of the best ways you can avoid being put in a position where you’re waiting on cash that’s owed to you is by setting up parameters to avoid the situation, in the first place. Start off by creating incentives for payments made on time, as well as having plans where a certain amount is due beforehand, rather than waiting on the full amount. Another way to avoid miscommunication is to ensure that your payment details and dates are very clearly stated and understood before the transaction takes place.
By using technology, you can use accounting software, such as Xero, in order to find out which of your clients have past due invoices. It’s important to reach out to those clients to ensure the invoices are paid. Not sure what to say when you reach out regarding those unpaid invoices? Try one of our templates. Click here to download templates.
9. Have a Mentor
Having access to a knowledgeable mentor is a bit like being able to look into the future. Mentors allow you to learn from their mistakes, while guiding you forward to greater success. Where can you find a great mentor? They’re probably a lot closer to you than you think:
One of the biggest things that will help you find a mentor is for you to be in a position to recognize one. Keep your eyes open at all opportunities, and never be afraid to network and reach out to friends, friends of friends, or other connections who may be willing to guide you in how to run your small business. Remember that a good mentor asks tough questions, and will challenge you to push past your current goals.
When looking for a mentor you’ll want to take a look your own close circles of friends and family to get started. Start local, and see if there are people within your own community who might be a good fit. You don’t have to travel around the world to find someone who can share tips and wisdom with you. Start asking around, and you may be surprised who turns up!
Once you’ve found someone to have as a mentor, don’t call it quits! Your mentor should be someone who is proud to hear of your triumphs and questions about how to improve. Be sure to keep in contact, and keep them regularly updated on how you’ve taken their advice into consideration. You can do this by simply sending a monthly email that let’s them know you’re appreciative and taking action on their suggestions.
Whether you use one or all of the tips we’ve shared, we hope you see that small business financial planning is more feasible than you thought. The best tip is to keep learning and looking for ways to not only survive, but thrive when handling the money side of your business. Need advice on the next step? Have additional questions? Comment below or send us an email at email@example.com