Few occupations are as gratifying as managing a successful business. Although you may still work 40 hours - or more - each week, many entrepreneurs enjoy the thrill of seeing their fledgling enterprise grow.
Despite the excitement of starting a company, managing a business requires exceptional work ethic, critical thinking skills and the ability to delegate tasks. Also, a solid understanding of financial management can be the difference between a successful venture and a failing business.
Here are a few basic yet effective tips for managing the finances of a small company:
1. Invest in invoice management software.One of the biggest challenges that SMB owners face is organizing their accounts payable. Without a reliable system, you may overlook payments to employees and independent contractors.
Not only will this upset your workers, but it will also give you an inaccurate understanding of your finances. You may also end up paying late fees to contractors who required you to sign a payment agreement, or you could overpay a worker and compromise your bottom line.
Fortunately, you can avoid these issues by investing in user-friendly invoice management software. These programs make invoice processing easier so you can stay on top of your accounts payable and avoid a headache come tax season.
2. Prioritize your personal finances.It is critical that you prioritize your personal finances over expanding the company. You may feel the need to spend all your time getting the business up and running, but putting off financial planning can destroy your business.
You can avoid a potential disaster - not to mention an IRS audit or bankruptcy - by paying yourself first. This doesn't necessarily mean skipping employee wages when times get tough, but your personal income should have priority over nonessential expenses such as marketing and worker benefits.
3. Separate business and personal expenses.
There you are at the store, and you need to pay for something quickly. Don’t just hand over your business credit card and expect to sort it out later; instead, be sure to keep separate bank accounts for business and personal expenses.
A business credit card can help you maintain an organized financial profile, and according to Entrepreneur, it can also help with taxes. And if you own an LLC, then combining your business and personal finances can render your liability protections invalid.
4. Don't be afraid to ask for help with taxes.
A tax advisor can help you avoid mistakes that could lead to a costly IRS audit. An accountant can also help you plan your finances so you have enough money for Uncle Sam come tax season.
5. Regularly evaluate and improve your financial systems.
Make sure you set aside time each month - even if it’s only 30 minutes - to evaluate your financial systems. Use this time to analyze your income and expenses, and write down your financial goals for the upcoming month and year. This will help you stay mentally organized and will give you a clearer understanding of your monetary capabilities.
When it comes to keeping track of your small business finances, you are in control. Don't be afraid to ask for help, and never underestimate the power of responsible financial planning.