Everyday Money Management Tips for Small Business Owners
Written by Guest Blogger: Jim McKinley
When it comes to running a business, attention to financial management is key. Budgeting, tracking expenses, paying off debt, saving for emergencies, and using your credit wisely is an ongoing process. All successful business owners commit to daily financial management, and you should, too! Here are some great tips to help you make smart money management decisions for your business and set yourself up for long-term success.
Lay the Groundwork
First, establish a strong foundation for your business financials. Nothing in business is certain. You never know when a new consumer trend, a lawsuit, an economic downturn, or a global pandemic will throw a wrench in your business plans. Make a plan to protect your business — and yourself — from financial threats like these.
Forming an LLC is a great way to shield yourself from liabilities. At the same time, your LLC will enable you to access special tax benefits that will save your business money in the long run. You can avoid lawyer fees by using an online formation service to form your LLC. Just make sure you understand the specific state regulations that apply to you.
Track Your Business Expenses
Tracking your spending will help you make data-driven decisions for your business. It’s tough to know where to invest your business capital if you don’t know how much you’re currently spending and where this money is going. The Motley Fool recommends using an accounting software application so you can automate this process as much as possible, but if you’re on a tight budget, spreadsheet software is better than nothing.
Keep Your Personal Accounts Separate
If you haven’t already, now is the time to separate your personal and business financial accounts. Keeping your accounts separate will make it much easier to track your spending and get all of your ducks in a row for tax season. This will also help you avoid spending your business funds on personal items and vice versa. As Chron explains, most banks make it fairly easy to open business accounts as long as you provide a few basic documents.
It’s important to understand that debt isn’t always a financial issue. In fact, most small business owners will have to take on some debt as they get up and running. Unmanageable debt, on the other hand, can become a real problem. Debt can snowball out of control before you know it.
If you’re holding onto a lot of business debt, implement a debt-reduction strategy ASAP. This could mean selling excess equipment, leasing out some of your office space, or shrinking your workforce and outsourcing to freelancers. You may also be able to negotiate with your moneylenders for lower interest rates so you can get a better handle on your monthly payments.
Pursue Slow and Steady Growth
Many small business owners make the mistake of funneling huge amounts of money back into their business without considering the added expenses — and other logistical issues — that come with sudden growth spurts. It’s easy to let your monthly expenses outpace your operating capital when you grow too quickly. Keep your business finances manageable by scaling your company slowly.
Keeping your business finances under control will ensure you always have capital on hand for emergencies — or to invest in promising opportunities. Try to get in the habit of reviewing your financial records on a regular basis, tracking expenses daily, and taking steps to secure stable growth for the future.
Are you new to the world of entrepreneurship? Besides financial management, there are so many things you could be doing to get ahead of your competitors and achieve success.
Check out these podcast episodes from Dan Casetta’s “Changing Lives Podcast” which can help you learn some fundamentals for business success:
- Small Business Success & Profit with Robert Gonzalez
- A Holistic Approach to Leadership with Quina Feldstein
- Strengthening Your Professional Relationships with John Oberg
- Principles For Building A Great Business with Roger & Tiffany Van Alst
- The Entrepreneur Roller-Coaster with Josh Goodman
To connect with the author of this blog, Jim McKinley, visit MoneyWithJim.org or email: Jim@MoneyWithJim.org.