If you’re running a small business, you probably already know that the key to success is not just how many sales you make but also the way you manage your money. In fact, proper financial management is necessary if you want your company to survive in the long term. That said, you have to make sure you’re equipped with good financial management abilities that’ll help your small business scale up. And we’ve compiled a list of 5 money management tips that might be exactly what you’re looking for.
Separate personal and business finances
One of the most important things to do when dealing with small business finances is to create clear boundaries between your personal and business bank account. This is the case because with split accounts, you’ll be fully aware of your business expenses such as cell phone bill and office supplies. Moreover, dealing with taxes will be a lot easier when your accounts are separated. Last but not least, separation of personal and business finances is going to make you appear more professional. That is something you should always aim at. It’s a good idea to turn to the bank you keep your own money at and open a business checking account under your company’s name.
Always try to cut your costs
When running a small business, it’s all about earning more than you spend. While increasing your prices may seem like a good way to make sure there’s always enough money on your company’s bank account, it’s also going to be a huge turn off for your customers. Therefore, trying to cut your costs is definitely a much better idea. If you decide to do this, you’ll need to bear in mind that there are two types of costs – fixed and variable. While fixed costs have to be covered no matter what, variable costs are something you can easily cut down on without sacrificing quality. For example, instead of using phone for your business calls, you can use free software such as Skype.
Pay your taxes
Paying taxes is an important part of dealing with small business finances. Of course, your taxes depend on what kind of business you’re running. For example, if your business is incorporated, you’ll have to pay corporate taxes and if you sell goods, you’ll need to remit sales taxes. It’s recommended that you set aside a portion of any money you earn to pay taxes. That way, you won’t have to worry about not being able to pay your taxes and thus putting your business at risk. Also, it might be a good idea to keep a tax payment schedule in order to ensure all of your taxes are paid on time. If you find dealing with taxes difficult, you might want to consult a local accountant.
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Use business finance software
There’s no need to say that we’re living in the age of technology and that there’s software that can help small businesses improve their operations. Some of the software used by small businesses has been specifically designed to help small business owners manage their finances more efficiently. For example, you can start using a recurring payment system that’ll allow you to automate billing for customers who buy from you on a regular basis. We’ve talked earlier about dealing with taxes and it’s important to say that there’s software that can help you with that as well. If you decide to do your own business taxes, using one of these will help you make sure there are no incomplete forms and inaccuracies when it comes to taxation.
Don’t underestimate power of saving
No matter what kind of work you do, unexpected expenses are going to come up. We’re talking about vehicles breaking down, a piece of equipment getting damaged and the prices if your supplies going up. In scenarios like this, having some money stashed on the side can come in quite handy. What this means for you is that you should make a habit of depositing a portion of your earnings into a savings account for your company. Using money from your savings account is always a much better idea than applying for a business loan, since you’ll avoid paying interest fees to a bank or a private lender.
There you have it – 5 tips that’ll help you become better at managing your company’s finances. And there’s no reason to stop there since you should always keep working on improving your money-management skills if you want to help your small business operate more efficiently.