Managing small business finances isn’t a piece of cake for all. Handling consistent and steady cash flow is a challenging task. A failure in small business financial management can make building a profitable business a far-fetched dream. Following are some of the tips to help you keep your small business finances running smoothly while also planning for your future.
1. Prioritise business financial planning
A comprehensive small business finance plan includes budgeting, accounting, future prediction, tax planning, and risk management. The best way to avoid tax stress is to prepare in advance. Avoid common tax mistakes with organized records and bookkeeping. Also, learn how to lower your tax burden as a small business owner.
2. Create a budget
Putting together a budget can completely change how you manage your small business finances and help you achieve revenue goals sooner than you’d expect. A budget can accurately help to forecast the revenues that the business will generate and even identify unnecessary expenses. The first step is to create an operating budget that shows the projected revenues for the financial year. It includes all the essential details about the business’s fixed costs, variable costs, and operating expenses. Next, focus on a cash flow budget to keep track of money going out and coming in. This will help to know the business’s liquidity position.
3. Corporate credit cards
Corporate credit cards aim to solve the hassles of digital spending for businesses. They increase the company’s purchase power while improving the cash conversion cycle with short-term credit at no cost (zero interest). With corporate credit cards, you also get a higher credit limit than personal cards to be able to make all business expenses without affecting personal liability. Corporate credit cards make compliance and reporting much easier for a growing business that needs to focus on core business goals.
4. Financial service/tool
Various financial services and tools can be leveraged to manage small business finances and cash flow. These tools help business owners and finance teams automate manual, repetitive financial tasks and provide insights into money flow.
5. Inventory Management
Inventory management is the fundamental building block to a company’s longevity. When the inventory is organized, the entire supply chain will be on the right track. Inventory mismanagement can lead to issues like mis-shipments, out of stocks, overstocks, financial inefficiencies, etc.
6. Keeping business and personal finances separate
Mixing business expenses with personal finances leads to disorganized records. It makes it challenging to keep track of money received and money spent. It can also result in overspending by using your personal funds for business expenses and vice versa. A clear separation between personal and business finances is also necessary to claim tax deductions for various business-related expenses.