For the majority of small businesses, managing finances is one of the most difficult tasks to perform. However, no matter how tedious this task may be, it is critical for your business’ growth. It not only helps you predict where your business is headed but also allows you to make more informed and data-backed business decisions. Not to mention that maintaining your financial records will make your tax reporting and payments much simpler.
Here are a few tips that will help you boost your finances in 2018.
Separate Your Personal and Business Bank Accounts
In order to save their time, many small business owners decide to use a single bank account or a credit card for both their personal and business expenditures. Even though this may seem convenient, this approach to your finances is more complex than it looks like and will result in a major confusion.
To separate your business finances from private ones, you should start by opening a separate bank and credit card account for your business. This way, you will track and measure your key performance indicators (KPIs) more efficiently and, most importantly, rely on actual data rather than guesswork.
Automate Your Finance Management
To get ahead of the curve, you need to monitor where your every single dollar is going or coming from. This means dealing with a bunch of bills, taxes, invoices, and receipts on a daily basis. Worse yet, if you don’t have any experience in accounting, you may significantly mess things up and jeopardize the future of your entire business.
Ouch.
So, what should you do in a situation like that? Hiring a full-time accountant may relieve your pain and give your finances a boost. Of course, this may cost you more than you can afford, especially if you’re new in the industry. But, don’t worry. We live in the era of highly sophisticated IT solutions that are evolving at an astonishing pace. Today, you don’t have to have Google’s or Microsoft’s budget to automate your accounting efforts.
For example, you could choose a cloud-based accounting platform or go with a direct debit system, specifically designed for a small business like yours. With tools like these, you will manage to automate your recurring payment collection, deal with multiple currencies simultaneously, and keep track of your cash flow anytime and anywhere.
When choosing the right accounting software, keep in mind that there are no one-size-fits-all options. To narrow your choices down, make a list of features it should have, be they business tax reporting or inventory management. No matter how popular they are, avoid tools designed for larger corporations and stick to ones specifically created for small businesses. Once you choose a perfect tool, it will do all the hard work for you and let you focus on some other aspects of your business.
Outsource Your Work
In today’s hyperconnected world, we’ve moved almost every aspect of our lives online. I’ve already mentioned how easily finances can be managed through an adequate cloud-based accounting tool. The same goes for communication.
Today, you can organize your workflow, share and store massive amounts of data, and manage your employees with the help of instant messaging apps like Skype for Business or Slack, office collaboration tools like Basecamp or Trello, and cloud storage providers like Dropbox or Google Drive.
This is exactly why you should consider outsourcing your workflow to the experts in your industry. As you’re not tied to any specific location, you can hire highly experienced people from all across the globe that will meet the needs of your business and contribute to creating a better corporate culture. Most importantly, you will build a highly diverse team and reduce your costs significantly.
According to some recent studies, remote working programs help companies save up to $11,000 a year.
Stay Organized and Plan in Advance
Owning a small business is challenging. Statistics tell us that 82% of small businesses fail due to cash flow problems. To survive, you need to monitor your cash flow regularly. Most importantly, you need to plan your expenses in advance.
By having a long-term financial strategy and a strong backup plan, you will be able to mitigate unwanted risks and grow your business successfully. And, even if some major financial issues arise, you will be fully prepared for them and be able to act fast.
Ask yourself what you should do in a situation like that. Would you take out a bank loan or sell invoices? Maybe you would partner up with a similar company in your niche and expand your business? What about equity funding? These strategies vary and, to choose the one that meets your business’ needs the best, you need to have a tried and tested plan at hand on time.
Overview
For businesses of all sizes, especially small ones, not keeping track of their finances regularly means missing out on important opportunities to reduce their costs and improve their profits. Even though monitoring and managing your activities may be a tedious task, the end result is definitely worth the effort. It will not only help you optimize your budget more effectively but also give you an opportunity for long-term sustainability.
About the Author
David Webb
David Webb is a Sydney-based business consultant, online marketing analyst, and a writer. With six years of experience and a degree in business management, he continuously informs the public about the latest trends in the industry. He is a senior editor at BizzmarkBlog. You can reach him on Twitter or Facebook.