In case you’ve recently started your own small business, you’re probably always on the lookout for useful advice that will help your business thrive and achieve its potential. There are many areas that you need to cover but finances are most certainly the most important factor that you cannot afford to neglect if you want your company to stay afloat. Here are ten small business finance tips that can mean the world when you’re just starting.
Learn to manage your cash flow
The first thing you have to learn when you start your own business is how to manage your cash flow. Cash flow is the movement of money in and out of your company and you need to track it on a weekly, monthly, or quarterly basis to stay on top of it. Your goal is to have a positive cash flow, which means that more funds are coming into your business than going out. It’s also essential that you understand that profit doesn’t equal cash flow as the latter also depends on your accounts receivable and payable, inventory, capital expenditures, and more.
Keep your fixed expenses low
As a small business, it’s vital to keep your fixed expenses as low as possible in the beginning. You want to plan out a year of expenses when running a company, including costs such as rent, utilities, taxes, payrolls, cost materials for goods and products, debt payments, interest, and various other operating expenses. By ensuring you don’t spend much on these essentials, you will also work toward a positive cash flow.
Separate your business and personal finances
Once you register your company, you need to get a separate business account for it. You should always keep your personal and business finances separate as that will not only help you with accounting but will also ensure that your credit is not affected in case something happens to your business. It will also be easier to see if your business is profitable and pay yourself a salary.
Set up a retirement account
Small business owners have to shoulder plenty of responsibility and that includes setting up their retirement plan. Look into what is necessary and what the minimal amount that you need to invest in your retirement plan is. That way, you will secure a future for yourself and be protected once you retire.
Find the right insurance
Many new entrepreneurs often overlook the importance of insurance but you shouldn’t make this mistake. In addition to looking for personal insurance that will cover your dependents as well, you will also need business insurance. No matter how hard you try to do everything by the book and fulfill every employee and client need, you never know when someone might decide to sue for whatever reason. To make sure you don’t give up a huge part of your funds in order to get insured, compare costs with the use of a relevant life insurance calculator. Having insurance can cover everything from missed time on the job to potential injuries.
Consider negotiating with vendors before signing a contract
When you’re just starting to look for people to work with, you want to do some research to find the best options. Once you find someone who might seem like an appropriate vendor, see whether you can negotiate the price and lower it before signing a contract. If you sign a long-term contract, you could be given discounts or even a grace period during which you can be a bit late with your payments.
Follow up on sent invoices
However, despite grace periods, you should do your best to not be late with your payments to your vendors. What is more, you should expect the same from your customers as well. If they don’t pay you on time and even start avoiding you altogether, it can seriously affect your cash flow. If you notice someone is late, you want to turn to experts for debt recovery in Brisbane if your company is located in Australia. These professionals will ensure your debts are collected and your cash flow is positive.
Lease business equipment
A great way to save some money on equipment is to rent it from businesses that specialize in that field. While some items you might need to purchase, some bigger equipment you can easily lease. For example, the printer/copier/scanner is a piece of equipment you don’t have to buy. Furthermore, these pieces that you rent will be maintained by the company you rented them from and you can easily get the updated version whenever it comes out, without having to buy a new device or machine.
Look for technology that will make it easier
To stay on top of your finances, you should also look for technology that will make it easy to manage everything. For example, there are various software programs nowadays like a business expense tracker that are made for individuals and companies to help them with bookkeeping and accounting. Solutions like FreshBooks, QuickBooks Online, and Wave are not difficult to learn how to use and you will have a much better overview of your income and expenses.
Have an emergency fund
Finally, no matter how much effort you invest in keeping your finances in order and having a positive cash flow, you never know when an emergency might occur. With that in mind, you must have an emergency fund that you can use if you find yourself in trouble. For example, if there is a season during which your sales are underperforming, you can resort to this to keep you afloat. Moreover, if a big piece of equipment breaks down or your company has to shut down for a while, having this money saved up will be a big plus.
Running a small business comes with many responsibilities, as you probably already know. Make sure you keep an eye on your finances at all times to stay afloat and thrive.