If you own a small business, you know that struggling through the first years is something that can be expected. But you also know that your long-term goal is to have the business make you money. To get your business to the place where you want it to be you know that you must be smart when it comes to managing your finances and you can’t take your eyes away from the cash flow. After all, problems with both cash flow and money management tend to be the most common causes for businesses to fail.
Set Your Business on the Right Track
Working with a financial plan to keep track of your finances is a must. You may want one that looks like this:
- 50 percent of your business’ revenue should go towards payroll and supplies
- 30 percent should go towards purchasing equipment or recruiting costs
- The remaining 20 percent should be used towards developing new products or services
Your accountant may also be a trusted source of information as to whether this is a sensible plan for your specific business.
What other financial management actions should you take to ensure success?
Here is a list of five small business financial management tips that will give you great results:
Loans Are A Way to Get the Capital You Need
If you want to see your business grow and expand, you should consider a loan. However, there are many different types of business loans and you need to know which one would work best for your business situation. You may consider a cash advance, a loan to finance equipment, a line of credit, a working capital loan, or a mortgage. Review any document before signing, and if you are not clear on the terms, talk to your lender.
Get an EIN to Start Building Your Business Credit
Getting an Employer Identification Number as soon as possible will allow you to start building your credit score. Keep working on improving it constantly and remember that what goes into this score are items such as:
- How much you owe
- Your payment history
- The types of credit you use
- Whether your credit is new or how long you have had it
Never Underestimate Your Costs
When setting price points, you must know your costs. And once you have priced your products or services, you must continually reassess them in order to incorporate any changes in your expenses, particularly when new products or services are added. Get into the habit of knowing your costs and working with them when setting prices.
Accounting Software is a Necessary Tool
Your aim should always be never to take on unnecessary expenses but getting accounting software will pay for itself many times over. And it will definitely work in your favor financially much better than having to pay an accountant on a regular basis.
Your accounting software will be something you use every day when you are working with balance sheets or looking at profit and loss statements. Keep in mind that managing the finances of your small business is not a quick or easy task to learn. On the contrary, it is a skill that you will master over time.
Select the Right Credit Card Processing Company
One of the ways in which small businesses can see an impact on their bottom line is through hidden expenses that pop up when they are least expected. And the fees paid for credit card processing can definitely be one of them.
Although a credit card processing company will help your business accept credit and debit cards, working with the right one is something that requires research on your part. Start by reading the entire contract before signing since fees can be hidden there. Also, understand the charges you will be paying every month. It may be a good idea to compare quotes from three different processors before deciding which one better fits your business.
Small businesses can be successful when steps such as the above are followed. Also, try to keep your ego in check and be willing to listen to the advice of other professionals, learn to delegate to your employees, and, when necessary be willing to reinvent your business to better adapt to the economic environment.
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