Out of the 30 million small businesses operating in the US, only 10 million of them have any employees. That’s partly because of the challenges to balancing small business finances. When you run a small business, profit margins are often so tight that it’s impossible to afford to pay anyone.
Here are the four key steps to managing your small business’s finances.
1. Focus on Costs
While it’s probably the most painful fact about running a business, you’re going to have to get comfortable dipping below your ideal profit margin. However, you need to mitigate those costs so that you don’t lose your ability to make a profit eventually.
Keep a close watch on your business expenses. Every small business will have to face close profit margins and so your expenses need to be your guide for growth.
You can fine-tune costs as you move forward.
2. Projections Are Important
In order to make the most out of your expenses and plot out your growth, you need to make some clear financial projects. Your projections need to account for both profits and losses. There will be maintenance costs, rent, taxes, and insurance that will persist then as they do now.
Anticipate future obstacles via a brainstorm with your team. Make sure that you’ve considered every possible solution that could put your financial future on the edge. Don’t overspend but don’t be afraid to stretch your wings and branch out into new areas.
3. Invoicing Is Essential
If you put off invoicing and don’t make it a priority, you’ll not only not get paid on time but you’ll also not keep your checkbook balanced. We’ve all been in the situation where we’ve bought something with a debit card or check and then were momentarily confused by the balance. We’ll either think we have more or less money than we really have in those moments where all transactions haven’t been reconciled yet.
When you do that for your small business, that can be treacherous. When your staff and employees depend on you, you owe it to them to have your money reconciled.
4. Keep Your Money Separate
The first thing you need to make sure of is that you pay yourself. It’s common for small business owners to forget to pay themselves.
You also need to keep your business and personal finances separate. It’ll be hard to do your taxes later and to account for losses. You’ll also be able to gauge your profitability more easily.
When you mix your personal and your company finances, you put together the potential for a tax fiasco when it comes time to file. Try using a paystub generator to ensure that you have your numbers in order.
Allow Your Business Finances To Grow
Once you’ve separated out some profits from your business finances, you need to invest your excess funds. Spending them on updated technology is tricky because obsolesces lowers their value. If you put your money in retirement, that’s a surefire way to make it grow.
If you want to see profits grow fast, check out our guide to marketing your business.