With so many people starting a small (or micro) business through the pandemic...or perhaps growing their micro business to include staff or commissions, managing finances is essential so it's a pleasure to have Regi Publico give us her top tips.
One of the biggest struggles for small businesses is the handling of their finances. Small businesses usually don’t have money to bleed, and that means making sure you’re financially above water is more important than it is for other businesses. One bad day could easily spell disaster if not handled properly.
Don’t let it overwhelm you. Financial management is tricky, but there are a few surefire ways to make it easier and more efficient. The use of advanced financial planning software to simple bookkeeping is only the starting point of your financial management lessons.
Financial Management Software
Bookkeeping is a pain, there is no getting around that. If you do not have a dedicated accounting department yet, or lack manpower, all processes that involve money are going to take longer. This is where software can really even the playing field for small businesses. Make use of expense management platforms and other similar financial software tools to streamline your business’ workflow.
They automate a lot of the grunt work that would usually take up too much of your staff’s time. Why spend hours manually inputting data on an ancient Excel spreadsheet when a program can just automatically track all of that for you? Financial management software is also crucial for making data analysis easier as it compiles all that complex data into a central hub.
Loan Smart
Unless you have really high capital, asking for loans is inevitable for a small business. Emergencies will occur, manpower will be needed, and buildings need to be maintained. There are simply too many moving parts in a business that needs money to keep going. Small businesses usually dedicate most of their revenue to making up for their capital.
Do not loan for anything that your business doesn’t actually need. Don’t ask for loans simply to expand your business quickly if you don’t have a plan. Sometimes, getting new assets or expanding won’t actually help your business make money, so don’t be too careless with non-essentials. Whenever possible, prioritize paying off loans first to prevent problems later down the line.
Be Consistent With Payroll
Payroll is one of the pillars of your business's financial stability. Making sure your employees are paid in an accurate and timely manner keeps them happy. It also makes balancing books easier if you go for a consistent form of a payment schedule. All new businesses often choose between bi-weekly or semi-monthly payout as these are the most common.
Pick the payment method that best suits your business. In addition, make sure that payroll is a high-priority task for your accounting department. Businesses that take payroll for granted are likely to fail because they keep ignoring the needs of their employees.
Look for Growth Opportunities
A good way to make finances a smaller issue for your small business is by being slightly small. You don’t have to go full corporation, but having more avenues for income is always a welcome reprieve for your financial plans. Growth opportunities should be geared toward making the day-to-day expense of the business much easier.
Forming partnerships with local businesses, increasing customer retention, networking with sponsors, and doing some good old-fashioned research are great ways to help your business expand. As the owner of the business, it is your responsibility to keep your business afloat. You can consider expansion a sort of lifeboat.
Perform Comprehensive Reports Of Your Finances
Finances aren’t as simple as adding profit and subtracting expenses. There are a lot of factors that go into keeping your books balanced, and that means you need to keep comprehensive reports. Financial reports are a great way to verify your business’ financial situation and also act as concrete proof of your finances to other institutions.
Staying within your margins is much easier if you have a handy margin analysis report at hand. The same goes for income statements and balance sheets, comprehensive reports must always be updated for easy review. All of these reports provide a good overview of your business, so make sure all of these are up-to-date and accurate.
Maintain Good Financial Habits
This one is pretty straightforward. All of the advice above isn’t one-and-done tips that fix your business. All of these need to be maintained consistently for you to see results. It’s definitely going to be a pain at first, but as soon as you see your business start turning a profit with surprisingly little in the way of expenses, you’ll be happy about being smart with your financial planning.
Conclusion
Financial planning is a fundamental part of business, and while these tips may be the best, they only scratch the surface of what you can do. Securing your business’ financial stability is a long road. The right attitude and a lot of knowledge go a long way in making that goal a reality.
Regi Publico is a full-time writer based in Manila who is also an artist for fun. She takes pride in her towering collection of books and loves reading about anything under the sun. She is passionate about sharing her knowledge through every article that she writes.