If you’re a business owner or hope to be one soon, then there’s a fair chance that finances aren’t really your strong suit. Entrepreneurs are more “big picture” people. They have big visions, and manage their business as one big machine. Spending hours staring at spreadsheets and stabbing at the buttons of a calculator probably isn’t what you were born to do! Unfortunately, finances are one of the many necessary inconveniences that are part of the package for small business owners. After all, I’m sure you want your company to make money, rather than lose it! To make the whole thing easier, here are a few valuable pointers for managing your small business’s finances.
First of all, cut down on the procrastination. This is pretty good advice for anything in life to be honest, but I really need to drive the point home when it comes to small business finances. As I mentioned earlier, the thought of bookkeeping probably doesn’t get you exhilarated. However, if you put it off repeatedly, you’ll only end up creating more issues for yourself further down the line. Ignore your financial duties, and they’ll just become bigger and bigger, and pretty soon you’ll be weighed down by a massive, complex mess that you’ll need to get through. Make things easier for yourself by spreading the work out! If you’ve been mulling over a big investment for weeks, make a decision today. If you’re spending every evening browsing through different small business loans, then set some time aside and pick one. There are countless tools out there to help you, and the sooner you start crunching through your financial work the less it will weigh you down.
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Another thing you need to do in the early stages of your business is to make sure you understand seasonal cash flow, and how the concept applies to your business. No matter what kind of business you’re running, your cash flow is going to experience peaks and troughs. In some months there’ll be so many orders flooding in that you’ll find it hard to figure out how much profit you’re actually making. In others, things will slow to a crawl. It’s important to understand and plan for seasonal cash flow if you want to use your company’s resources as effectively as possible. Study trends in your cash flow, narrow down the periods of the year when things really start to slow down, and then plan to set aside a capital cushion to see you through these hard times. If you’re a small B2C business that sells low-price items, then you’re likely to have a very fast sales cycle, and won’t need to worry about having a buffer too much. However, if you’re running a B2B operation, with a sales cycle that spans months or perhaps years, then you’ll need a little extra capital in the bank. This can mean the difference between staying afloat when things get tough and having to file for bankruptcy.
Next, make sure you’re playing your strengths. This may sound pretty obvious, and you might feel that you’ve been doing it fairly well so far. Don’t scroll down just yet though! Here, I’m talking about the common start-up owner’s attitude that they have to remain independent, and create everything from scratch. If you want to keep your finances as straightforward and manageable as possible, then it’s important to know when you should outsource and when you shouldn’t. Sure, if you’ve got an experienced programmer in your office, then it can be tempting to get them to deal with your app development needs, and pay him his regular salary. However, if he’s already serving an important function to your office, then there’s probably a better solution. Sure, you might save a bit of money by piling more stuff on someone’s workload. However, this is going to be nothing compared to the money it will cost you to take someone away from their regular, revenue-driving duties. Odds are, everyone at your business is already doing the job they’re best suited to, so don’t try to reinvent the wheel. Instead, look for outsourced solutions or invest in tech tools that may be able to help you. It’s their job to provide these services, and no good B2B business owner is going to risk a stain on their professional reputation. It may seem like a lot, but your finances will be far more stable in the long run if you know where to outsource.
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Finally, if you’re working yourself too hard, know that something needs to change. In the early stages of their ventures, a lot of entrepreneurs set themselves very demanding targets. This usually ends up with them working 80-hour weeks, and getting into a feverish workaholic’s mindset. Yes, you might be hitting those goals or even going above them. However, if you’re currently doing these kinds of hours, you’re not going to be profitable in the long run. For starters, spending your whole life developing your business is going to put a strain on both your health and your social life. Secondly, working like this and basing your future projections around it is a big mistake. A CEO who lives and breathes the business simply isn’t sustainable! Sure, pulling a couple of all-nighters running up to a big product launch is fine. However, you should never make it part of the routine! You will inevitably want to roll back your workload, and when this happens your cashflow will drop significantly. Recovering from this will be absolute chaos, because everyone was previously relying on a super-human CEO. Don’t buy into growth hacking too much, and ensure all your labour costs are accounted for. If you undervalue the time you’re putting into your business, it will hurt everyone involved.
There you have four of my best tips for staying in control of your business’s finances. I hate number-crunching just as much as you do. However, without good financial management, a business is doomed to fail. Educate yourself, then tackle the issue head-on, and soon your finances will be much easier to manage.
This article was provided by ellie jo