As a small business, money matters, you don’t have large sums of money swirling around in various investments and funds: you just have your business bank account, through which all of your incomings pass and all your outgoings leave. So managing your money effectively is a huge part of what makes your business successful – and mismanagement can cause your business to go into debt and even to fold. This article addresses how your firm can manage money better, making use of financial advisors, technology, and other tips offered by small business leaders.
You needn’t pore over a book of orders, invoices, incomings, and outgoings each month in order to perform your accounts. Actually, for a number of years, accounting software has been bookkeeping for millions of small business owners worldwide. And this software keeps getting better and better, adding extra features that help small businesses take care of their finances.
Modern accounting technology can handle many different tasks all within a single app or online portal, which means that you can spend more time serving your customers and less time worrying about balancing your books, getting your tax affairs in order, and ensuring that there’s more cash heading into your account than is heading out.
Speaking of tax, it’s worth highlighting that a large number of small businesses find this aspect of bookkeeping particularly daunting. Some of them tend to leave organizing their tax affairs to the last minute, only to find out that they owe such a large sum that they’re unable to pay it right away. In these cases, a business will be at risk of fines and penalties that could know the entire enterprise out of action.
So getting your taxes right is important. As well as accounting software, you’ll be able to engage with other technology that helps set aside the tax you owe each month. That way, you’ll not eat into the portion of your income that will one day need to be paid to the taxman. Financial advisors will always highlight tax as one of the principle concerns for any small business.
But financial advisors offer so much more than simple advice on how to handle your tax affairs. They’re also there to help you think about what you should invest in your business and how you can streamline your expenditure to ensure you’re only parting with cash that’s going to add value to your business. If you have excess cash knocking around, they’ll tell you what to do with it. If you’re worryingly short on cash, they’ll help you find ways to locate more.
So knowing a financial advisor is often helpful for small businesses. You may only turn to them a couple of times a year, on a consultant basis, but they’ll be able to offer sage, independent advice that can really put your mind at ease and give you a sense of the direction that your firm is headed in.
Your firm operated with a number of overheads. From the cash you pay employees to the fees you pay for internet servers, electricity and transport, all of these add up to a considerable sum at the end of the month. And if you’re not managing these expenses wisely, they can spiral out of control – consuming more of your profits than necessary and jeopardizing your entire business model. This means that your overheads should be a constant work in progress, something you fine-tune over time.
For instance, if you’re concerned that you’re spending too much on wages, you may wish to make a member of staff redundant or offer part-time positions in the future. If you’re worried that you’re wasting cash on bills, try another provider who might offer a cheaper deal. These steps will help you take responsibility and ownership over all the costs that your business accrues as it operates month after month.
One of the time-tested ways to get more cash into your firm is to raise your prices. You’ll do this every now and then simply to rise with inflation, but you may wish, if you’re offering a little more to consumers as a business, to raise your prices in order to generate more income from each sale. Meanwhile, some firms also choose to lower their prices, with this strategy helping them get more business and generate a higher volume of sales.
Getting your pricing structure right is, therefore, something that you should spend time planning out and experimenting with. Undoubtedly, your pricing will be dictated by the market in which you and your competitors are vying to secure the same customers. But you should also concentrate on your firm’s value, and your profit margins, in order to make the most out of every sale you make.
Finally, it’s important to concentrate a little on loans. During the pandemic, thousands of small businesses turned to generous loans turned out by banks and government organizations – often simply to survive. That was especially the case for firms that simply couldn’t operate under lockdown conditions and failed to generate income online during the height of the pandemic. But outside of a pandemic, loans can be a little riskier – landing you, potentially, in a great deal of debt.
Therefore any firm that’s running low on money should seriously consider other options before taking out a loan. Repayments can eat into the profits that you’d otherwise use to stabilize your ship, leaving you stuck in an endless cycle of repayments and subsequent loans. Meanwhile, if you’ve already taken out a loan for your firm, it’s important that you put in place a robust plan to get it repaid as soon as possible. Some interest will be added, but continual, long-term repayments simply don’t make sense for ambitious businesses looking to grow.
There you have it: a selection of money management tips that’ll suit any kind of small business. Don’t leave your financial affairs down to chance, and don’t neglect how money works in your firm – take responsibility, and you’ll find that you’re converting more cash into profits and wasting less over time.