No one likes the idea of being out of money, especially business owners. While there are plenty of challenges that involve starting a small business, managing finances certainly tops the list.
Oftentimes, a business owner can get sloppy on handling cash flow. They spend beyond their budget, make risky investments, or, worse, mix their business and personal finances.
There are plenty of ways on how to manage business finances. Besides improving the operation process, following money management habits is a sure path towards becoming a smart business owner.
The National Financial Educators Council defines money management as a broad domain of knowledge related to handling money wisely, including budgeting, saving, or investing in personal assets. If you are a small business owner who struggles with controlling business funds, this guide offers lessons on managing money for your small business.
Here are some strategies to make better financial moves:
1. Pay Bills on Time, No Matter What
Paying bills on time may seem an obvious rule, but not everyone diligently follows it. Accounts payable, taxes, utility bills, credit card, and loan payment fees are few business bills everyone deals with regularly. Each one comes with severe penalties if you fail to settle your payment, such as additional interest, late fees, poor business credit, and an unsatisfactory relationship with business partners.
You may have heard this plenty of times, but here is a gentle reminder: pay your bills on time and stay on top of your deadlines. Since many business owners are busy managing their operations, important reminders like deadlines can slip on their minds.
As much as possible, set monthly reminders to prevent payments from falling through the cracks. Record deadlines on your phone or computer or write them down and post them on spots you can easily see.
2. Keep Track of Your Spending
Managing a business means handling multiple accounts, such as credit cards, savings, and checking accounts. When paying for small expenses, you can easily turn to any of these accounts to settle your fees. However, small expenses are nasty little creeps. If you fail to keep an eye on them, they can grow as much as they please.
Failing to keep track of your expenses can lead to unwise spending, overdraft fees, misuse of funds, and other consequences you aren’t ready for.
To stay on top of your balances, monitor your spending and withdrawal activities from each account. Online accounting books help record and track all your financial transactions. Prepaid debit card solutions with flexible payment deliveries can help you monitor whatever you spend online and in-store.
3. Never Combine Business and Personal Expenses
This is another money management issue that many business owners fail to live by. Mixing business and personal accounts also come with financial consequences, from personal liability, overspending, tax issues, disorganized account records, and legal issues.
Mixing accounts is a sign of unprofessionalism that can turn away future investors. It can ward off potential growth opportunities for your business.
When money feels tight, never give in to the temptation of securing your business expenses with personal funds. Set a budget for both your business and personal expenses. This way, tracking incoming and outgoing money is easier.
4. Negotiate with Vendors as Much as You Can
Like bargain shopping, negotiating with vendors is a great way to fish out great deals and lower prices. There is nothing wrong with making negotiations as long as you do them the right way.
When dealing with business suppliers and vendors, try getting a good bargain by looking for areas of mutual gain and quoting multiple suppliers. Aside from deals, don’t forget to check purchase terms.
5. It’s Okay to Be Frugal Sometimes
While most people see frugality as a negative thing, it wouldn’t hurt if you turn yourself into a thrifty business owner when the situation calls for it. Too much spending is a powerful tool that can destroy your business once it goes out of control.
Never underestimate what budgeting can do. It helps you achieve all your expense and revenue goals for your business. You can start by creating a realistic business budget for ordinary expenses. Look for rebate offers, coupons, secondhand equipment, and other energy-saving ways for cheaper utility fees.
Money management tips are useless unless you put them into consistent practice. Understanding how your finances flow can prepare you for bigger financial decisions in the future. Follow these tips by heart, and you will be on your way towards a more successful business.