Being a small business owner means being responsible for many different aspects of your business operations – including its finances. When you’ve done all the hard work of turning your passion into your livelihood, it’s essential to keep the financial side of things in good standing so your business can thrive. Of course, managing finances may be easier said than done. Particularly if it’s your first time running a business, everything from budgeting to ensuring you make a profit can seem intimidating. So, why not start with the basics? Check out these 9 money management skills to get you on the right path to growing your business and your wallet!

Separate Your Bank Accounts

Your bank accounts need a work-life balance too! It’s important to create separate bank accounts and credit cards for your business to avoid any issues such as lost records, overspending, or mixing business liabilities with your personal finances. Plus, having a separate bank statement specifically for your business can be useful when it comes to tracking profits and monitoring your spending.

Define Your Business Goals

Before you start building your business’s budget, make sure you have a clear vision for the future. Outlining your business goals is the key to creating a strong foundation for your

long-term growth strategy while also pointing your financial plans in the right direction. Just be sure that you are being SMART with your goals – making them specific, measurable, attainable, realistic, and time-sensitive. Also remember that it’s okay for goals to change over time. If you notice that something in your business model is not working, don’t be afraid to switch things up! Pivoting in a new direction could be the move that takes your business to the next level.

Stick to a Budget

This number one rule of money management also applies to running a business. With a budget in place, you can start organizing your finances to reach your revenue goals, get an overview of your operation expenses, and prevent overspending. Just as you would with a personal budget, you can start creating your business budget by listing out the expenses your business will face each month, including:

  • Fixed expenses, such as payment for employees, reoccurring maintenance fees, or – if you have a physical office or storefront – rent & utilities.
  • Variable expenses, including inventory, equipment servicing, marketing campaigns, and more.
  • Savings, where you should set some money aside toward long-term growth or unexpected expenses.

Similar to your business goals, don’t be afraid to be flexible with your budget. If you notice that your profits are lower than expected or you’re spending more than you should, explore ways to reduce your expenses and get your business back on the right track.

Reanalyze Costs

If you notice that you’ve got more cash going out than coming in, it may be time to consider cutting back on your business expenses. For instance, maybe there are other vendors with more affordable rates that you can use as suppliers. On the flip side, maybe there are projects that you’re handling in-house that would be more cost effective to outsource to freelancers. At the same time you’re analyzing what costs you could cut, also look for opportunities to increase your revenue. For example, email and social media campaigns are simple, cost-effective ways to market your products to a wider audience. You could also consider starting discount, loyalty, or referral programs to create returning customers while encouraging them to spread the word about your business.

Stay On Top of Cash Flow

A business can’t run without a healthy cash flow. Otherwise, how can you ensure your staff and vendors get paid on time? How can you protect your business from emergency expenses? How are you going to pay for your day-to-day operations?

One way to help monitor your cash flow is to create a cash flow projection. This is a financial document that summarizes and analyzes the cash going in and out of your business, helping you predict future expenses. Not only this, but a cash flow projection can be useful in examining business operations and spending, how well you’re meeting sales goals, and what the rate of return is on your business investments.

Keep Up the Good Credit

As you look for ways to start or grow your company – including real estate for new locations, new equipment, or financial backing to help get your small business running – you’ll want to make sure you have good credit to your name. With good credit on your side, it’ll be easier for you to find investors and shareholders as well as qualify for loans. To make sure your business credit stays in good standing, be sure to stay on top of deadlines for bills, consider creating a payment schedule to help make payments on time, and try not to borrow more than you can afford to pay back later.

Pay Yourself

A business is more than just your passion – it can also be your livelihood. Especially when you first open your business, you’ll be tempted to reinvest all your profits into making it the best it can be. However, don’t forget about your own role! Make sure to include a salary for yourself in your monthly expenses so both the business and you are being kept afloat. Plus, it’s never too early to think about investing in your own future as well as your business’s. Unlike a large corporation where retirement plans are already in place for you, it’s up to you as a business owner to set money aside for your financial future.

Be Prepared for the Worst

Life is unpredictable and your business is no exception. It’s good to be prepared in case of emergencies such as equipment failure, property damage, or more. Putting money aside each month into a business savings account can be a smart move to help create a buffer in case of these unexpected costs. To take things a step further, you can even create a risk management plan in case of a serious hit to a business – such as lost market shares or a drop in sales. A risk management plan is not only reassuring to staff, investors, and shareholders but it can also be your guiding light when getting your business through any financial emergency.

Consider Professional Financial Help

Managing business finances can be challenging – especially if you’re a first-time business owner. Know that you’re not alone, and there are always professionals who you can turn to. While seeking help from accountants, bookkeepers, or financial advisors may create added costs, their help can be worthwhile. In fact, their knowledge and expertise can be useful for creating an accurate business budget, finding ways to cut costs, reducing any financial liabilities, and keeping you informed of economic trends.

Summary

The financial health of your business is a key part of keeping it alive. Yet when you’re focused on gaining new customers, product production, and finding opportunities for growth, finances are the last thing you want to worry about. Hopefully with the 9 practices listed above, you’ll have the basic building blocks for strong money management and be able to focus on giving your business the success it deserves.