9 money management tips to keep your small business afloat
Nicky31 Jan, 2022
Starting a business is a journey of high risk and high reward. The rewards are potentially limitless, but the trick is navigating those risks, especially when you’re starting out.
One of the main risks? Finite resources.
Access to limited capital means less room for error, making smart money management crucial to success.
Read more: A guide on invoicing for small businesses
Getting on top of your business’ finances might seem a little intimidating, but it doesn’t have to be. With just a few key decisions and sound financial habits, you can put your business in a position to not only survive but to thrive, even when challenges arise.
That’s why I’ve compiled these nine simple money management tips every small business owner should be doing to set themselves up for success.
1. Have a business plan
As a small business, if you don’t have a business plan, you’re basically operating blind. It’s crucial that you outline your business’ plans for growth and development as well as your income and cost projections. This will give you a clear understanding of what you can afford and what you can’t. It’ll also give you the confidence to make informed decisions about things like ordering stock or managing your operational overhead.
2. Make a budget (and keep it up to date)
Running a business can feel like a black hole for your cash. That’s why having a monthly budget is essential to control your spending. You’ll also get useful insights into your money habits and know where you can do better and be less wasteful. Remember to update your budget every 6 to 12 months to keep it relevant to your business activities.
3. Remember to save
Now that you have a budget, you should build saving into it. This way, you will have more options for financing planned, or not so planned, business expenses. It’s also a good way to start an emergency fund for the kinds of expensive surprises that are bound to come up when you’re running your own business.
4. Balance your books, or get someone to do it for you
Take an accounting course, get good accounting software or hire a bookkeeper. Whatever you do, keep your financial records accurate and up-to-date from the start. Not only is it essential for making accurate projections and strategic business decisions, but it will also save you a lot of headaches and cash when tax filing season rolls around.
5. Be cautious with cash
Cash is king, especially for a small business. Running out of cash could mean the end of the road if you’re not careful. Keep things as lean as possible, and keep your spending under control until business picks up. If you’re starting out, a good rule of thumb is to have enough operational cash for your first three years of business.
6. Keep your cash flowing
Good cash flow is not just about having money in the bank; it’s a vital indicator of the health of your business. This becomes key when you want to appeal to a new investor or get approved for a bank loan. When your cash flow is well managed, you place your business in the best financial possible position to weather a storm or expand when things are going well.
7. Separate business from personal
For clarity, sanity and general good business, you want to keep your personal finances out of your business (and vice versa). This will shelter you personally from any business risk, and safeguard your business from any personal financial issues. It will also make things like accessing capital, tax filing and insurance much less complicated.
8. Know your risk
As a business owner, you want to understand where you’re most at risk. You might be vulnerable around cash flow, or it might be something external, like your dependency on one supplier or the seasonality of your market. Once you know what it is, you can start putting plans in place to mitigate the risk and be less exposed when problems arise.
9. Get smart about getting paid
Getting paid on time is the lifeline of any business, so you want to be sure you’ve got the right systems in place to make it easy for customers to settle their accounts. Try incentivising them to pay early with a discount or an added value offer.
You should also make it simple for your customers to pay you. That’s where SnapScan comes in. With SnapScan, it’s really easy to get paid, whether you have a market stall, a physical store or an online shop. Simply display your ScapCode wherever you do business or send a PayLink via text or email. You can even add them to your invoices! It’s quick and secure. Your customers will be able to pay you using their phone, without any need for bank details and EFTs.
Click here to find out how SnapScan can help you manage your payments, and make life easier for your customers too.
By following the money management tips outlined above, you should slowly be able to get a handle on your finances. Although some of these tips are easier to implement than others, if you take things one step at a time, you’ll be able to keep your small business afloat.
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