Running a small business can be tough. There’s so much to think about, and so many things that need to get done. As the sole proprietor of your company, you wear many hats. You might be the accountant, manager, designer, and more. You’re the only one who bears responsibility for your own business. It’s important for you to rely on yourself to take care of your finances and make sure that they stay in order.
To help you out with this challenge, here are 9 tips for better financial management for SMBs.
Keep your books sound
Books are the main part of the whole accounting process. Especially when dealing with setting prices, reconciliation, analyzing, etc. However, some companies think that nothing will happen if they skip a week or two of updating the current information about their businesses. And what will happen as a result? Sleepless nights and countless thoughts like “Why didn’t I do this in time?” That leads to the accountant’s headache when they see tons of errors and incorrect payment data in the books.
Avoid errors in your balance sheet with the help of accounting software such as Synder. These tools will help you do your taxes and other paperwork, as well as provide all the information you need to take care of your company’s finances.
Manage your cash flow timely
Financial management is closely connected with cash flow management. If you cannot organize regular transactions, then you can hardly plan your finances and make business projections. Cash flow is the process of receiving and making payments. When all cash flow processes are automated and carried out without delays, it is much easier for businesses to keep up with financial goals.
The cheapest and most effective way to pay, and get paid on time, is to use online payment processors. There are many apps that provide invoicing features for companies. How does it work? You just need to fill in the payment details (product, customer, shipping, price, etc.) in the invoice form and send it to your client. Usually, such applications and online tools also allow you to send automatic reminders to customers who forgot to pay the invoice.
Prepare financial statements ahead of time
Preparing financial statements ahead of time can help you to be more organized. It also helps if you are self-employed or have a small business as it will prepare you for your yearly taxes.
Financial statements are the best tool for productive financial management. There are a great number of reports that you may find helpful in finance planning and even financial forecasting and modeling: Profit and Loss statements, balance sheets, cash flow statements, income statements and many more. All these statements allow you to summarize the company’s results over a month, quarter or year.
Don’t forget about financial forecasting
Forecasting is an important function in finance. It is the process of identifying future expectations and projecting them into the present moment. It allows companies to better plan for their future and allocate resources accordingly.
Forecasts are used to predict how many goods will be sold, what costs will be incurred, and when cash will be collected or paid out. Forecasts are also used to predict customer behavior, such as the number of customers who might buy a product over a given time period or how many promotions to offer during that same time period.
There are many different forecasting methods that can help you predict what will happen with your business finances. Learn more about financial forecasting.
Organize your taxes
For many businesses, the tax season is a period full of stress, paperwork, and additional expenses on bookkeepers and accountants. One of the biggest pain points is counting taxes correctly – not to underpay or overpay them. However, if you keep your books ready for the tax season, you will no longer have to worry about it. When all payment transactions are in your books and they match your checking bank account, you just need to summarize all the taxes and file the tax return to the IRS.
But financial management isn’t only about paying taxes correctly, it is also about minimizing them. Professional financial managers recommend businesses to look for tax deductions and lower the profit by increasing the spendings. These 2 tactics are the most popular and effective among business owners. It will help you cut down the expenses on taxes and achieve better financial results.
Keep track of your budgets
Budgeting is the planning of a company’s spendings, such as salaries, real estate rent, inventory purchases, etc. based on the business income and expenses. Usually, creating a budget plan is the first step in financial management, as it is an essential part of both financial strategy and business strategy. It helps a business estimate expenses in advance, get financially prepared for them, and predict the net profit of the company.
Budgeting allows business owners to close at least 3 main tasks:
- Save money on unnecessary or additional spendings
- Organize outcoming payments (for example, for suppliers or vendors)
- Increase the income.
It is recommended to make a budget for a month and for a year to keep track of the company’s expenses. This way if you see that your expenses exceeded the permissible plan during a month, you will be able to update and optimize the annual budget to finish the year with a profit.
Plan the financial strategy
Financial strategy is the same as a financial plan, but with a long-term perspective. Usually, the financial strategy includes not only profit goals, but also the risk assets, the analysis of business opportunities, economic threats, and much more.
To prepare a decent financial strategy, you need to take 3 essential steps:
- Highlight the main business objectives precisely
- Analyze your potential resources and partnership opportunities
- Make an accurate target audience profile
These steps will give you an overview of your business so that you will be able to calculate an approximate income and predict future growth.
Invest in business development
It is a big mistake for business owners to spend all of their income on regular business needs and not invest in business growth. There is always a lack of money spent on advertising, new product lines or services, and professional employees. However, without these spendings, your business won’t grow. It’s important to set aside a certain percentage of the company’s profit for better business opportunities. Then your business will achieve stable growth and financial success.
Choose accounting software
Accounting software is like a personal financial assistant for small and medium businesses. It carries out all bookkeeping and accounting work for your business, so you can relax and enjoy accurate books and paid taxes. Moreover, many financial experts emphasize that investment in annual accounting software is much cheaper than hourly fees of decent accountants.
One of the most popular solutions among business owners and secure accounting software for e-commerce businesses is Synder. This accounting automation software has already won the trust of thousands of SMBs in the USA, UK, Canada, Australia, etc.
We all know how important it is to manage your finances. But, with so many financial decisions to make, it’s difficult to know where to start.
To build up effective financial management, accountants and financial managers need to prepare more detailed statements that also include projections. On their basis, business owners can make decisions about the company’s directions of development. Following these tips, you can raise your financial management to a new level.