99.9% of businesses across the US are small businesses and that percentage refers to 33.2 million entities across America.
If you identify as one of these numbers, I’ll let you in on another shocking statistic. Over 40% of small business owners are financially illiterate and don’t know the correct way to do finances for small businesses!
But the road to financial literacy isn’t one you can take overnight. It takes a lot of time to heal your financial health, grow yourself, and learn how to manage money in a small business when you’re your own boss.
And I thought it’s high time I helped you with the top 10 financial tips for small business owners. Bookmark this blog for any time you need to remind yourself of business finance advice!
Pay yourself a salary
Over 80% of small businesses have no employees and every aspect of business operations is being done by the owner. And if you’re staying on top as a small business owner, pay yourself a salary.
Not only does it incentivize your efforts but also ensures that you have a way to pay your personal expenses for the month. And the reason I mention your personal needs here is because business and personal lives are intertwined for most small-business owners!
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Invest to grow your business
It’s crucial to set aside some business funds to invest back into your business plan so it can grow. In fact, this is one of the top cash flow strategies that new small business owners shouldn’t forget about!
By investing in your business, you allow your operations to expand, your customers to feel fulfilled and yourself to prosper in the long run.
Monitor your books every month
One of the biggest financial management mistakes I see people make in their businesses is forgetting to monitor their books. Your books are one of the greatest business assets that can help you make informed financial decisions and make running a business feel like a breeze.
So create a monthly profit and loss statement, reconcile your accounts, and review your balance sheet regularly. This will give you a snapshot of your business’s financial health and help you identify any potential issues or opportunities.
Plus, it’s important to regularly track and categorize your expenses. When you’re monitoring all these numbers and financial statements, you’re staying up-to-date with where your money came from and where it went.
That is how you make smart and informed business decisions!
Keep a good business credit score
As your business grows, you’ll need to make bigger purchases. This can be things like moving out of your bedroom into a proper business setup or getting insurance. But if your credit score isn’t good, it’s hard to achieve all these things down the road.
The same goes for a poor credit score because of your business, leading to problems in your personal life!
To keep your credit in good shape, try to pay back all the money you borrow as fast as you can. For instance, don’t leave a balance on your business credit cards for more than a few weeks.
Also, don’t borrow money with high interest rates that you can’t manage. Only go for loans that you can pay back quickly and better manage without any trouble!
Hire an accountant
Sometimes the most obvious business tip is right in front of you, but you can’t recognize it. A lot of business owners think they can do their own math and just be great at accounting because they found fancy accounting software online. And sure, you can generate a profit and loss statement or some other document.
But can you read what it’s telling you? Can you make a smart decision on it? Can you give yourself financial advice for small business owners by just looking at those numbers?
So trust me when I tell you that hiring an accountant saves you more money than it costs to hire them! Accountants can alleviate financial stress, let you focus on operations, and provide valuable small business finance tips!
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Don’t be afraid of business loans
Loans can make business owners worry about what happens if things don’t go well financially. But getting money from loans is important. It helps a lot when you want to buy equipment or hire more people.
You can also use the loan money to make sure you have enough cash, so you don’t have trouble paying your employees and the people you buy things from. And the good thing is, the best loans for businesses have rules and costs that many small business owners can easily manage.
Keep a healthy cash flow
One of the biggest reasons small businesses fail is because of poor cash flow management. Cash flow refers to the path money takes when it enters your business and leaves it.
Keeping a healthy cash flow is perhaps the biggest personal finance tip out there!
It ensures you have enough money to cover expenses, pay employees, invest in growth, and handle unexpected challenges. A positive cash flow keeps operations smooth, fosters financial stability, and enhances your ability to seize opportunities and navigate uncertainties effectively.
Create an emergency fund
Aim to keep aside enough money – about six to eight months’ worth of expenses – for unexpected times. You can’t predict when sales might slow down or if your business faces a lawsuit.
But having extra funds can help a lot during financial emergencies, making it easier to handle tough situations. Sometimes, it can even be the element that saves you from going out of business entirely!
Spread out your tax payments
When you’re a small business owner, taxes aren’t withheld by your employer anymore. No, they’re your headache now.
But I’m about to tell you, they don’t need to be a headache at all!
On a monthly basis, start spreading out your tax payments and save around 15-25% of your monthly income to pay during tax season. This diligent effort can save you money and time when its time to file those taxes and returns.
Hot tip: Keep a record of any receipts and invoices to help you file returns and tax write-offs for your business. This can include part of your rent, internet, and phone bills, and even trips you took for business-related activities!
Budget and plan for the future
If you’re not thinking 5 to 10 years ahead in the future for your business, you’re already behind. Budgeting and planning are tools that help small businesses get ready for whatever is on the horizon.
When you save money and make plans, you’re getting yourself ready for unexpected things, making your business stronger as it grows, and being ready for shifts in the market. It’s basically like having a map that shows you the way to keep your business successful no matter what life throws at you!
Streamline your business with healthy habits
Feeling a new sense of freedom with these business finance tips for your small business? Smart money management can take your business to new heights and growth levels. With small businesses taking over the American corporate world, financial plans and rules can feel tricky for many business owners.
You’re often left thinking about how to manage money for a small business or how to deal with business expenses while caring for your personal needs. But with my financial advice for business owners, you can build your business and never have to wonder how to do finances for a small business. These financial tips are there to save the day!
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