Keeping track of small business finances can be challenging and overwhelming, it’s important to pay attention to all financial aspects in order to run a sustainable and productive business; while also avoiding bankruptcy. A Philadelphia bankruptcy lawyer pointed out that bankruptcy is 100% preventable for a small business; even more so if a business owner takes precautions early on and is proactive in avoiding financial problems.
Additionally, staying on top of business finances will allow you to make sure there is a steady cash flow that will ultimately allow you to improve and grow your business. Here are some tips that will help you manage your small business finances in the most efficient and lucrative way possible:
Manage Your Small Business’s Finances
The Benefits of Bookkeeping
It’s crucial for small business owners to bookkeep and keep track of all documents and records. Bookkeeping will allow your business to be more organized, letting you find what you are looking for quickly, and it will also allow you to not look over any expenses. Bookkeeping will keep track of past, current, and future expenses in order to clearly show where the money is going.
A business owner will have the ability to constantly check on expenses and spending so that his or her small business's finances never get out of control. Everything having to do with money at your small business should be tracked; anything from employee’s pay, to equipment expenses to benefit packages should be logged somewhere.
Keep Your Business Separate From Yourself
Often small business owners don’t take themselves out of the financial aspect of the business enough, meaning, they invest too much of their personal finances in the business or will not pay themselves, putting money directly back into the business.
Though a good business owner will always make sure his or her business is doing the best it can financially, it’s imperative that the business owner keeps his or her finances separate from those of the business. If a business owner is investing all of his or her pay into the business and something happens to the business, the owner will be left with nothing. Therefore, always make sure to pay yourself and have two separate bank accounts.
Similarly, keep track of personal loans you have made to your business. Keeping accurate records of your personal money you invested in the business will easier allow you to replenish your personal bank account.
Avoid Premature and Excessive Spending
Until your business is making steady cash flow and debts are beginning to get paid off, avoid excessive spending; but even more importantly, avoid premature spending. Make sure to invest all money appropriately, avoiding spending money on things that are not beneficial to the business; such as, software that is irrelevant, top of the line travel luxuries, and marketing materials. Though these things can be beneficial to a business down the line, don’t invest money too early on these things.
Premature and excessive spending can cause a small business owner to overlook certain finances, accidentally letting them get out of hand. If small business finances are overlooked or ignored, the higher the chance that the business will go bankrupt or have to close down because the business can not sustain other financial necessities.
Prioritize Paying Off Debts
If you borrowed money to start your small business, a helpful tip to help you manage these debts is to prioritize them. Paying back secured debt first, debt that is backed with collateral is best to pay back first in order to avoid losing anything if your business were to go under. After a secured debt is paid back and you are repaying unsecured debts, pay off the ones that have the most interest first, then with whatever remaining debts you have, try to pay small amounts to each every month.
A debt repayment plan could also help you manage your small business finances in a positive way. Creating a written plan with how much you need to pay to each creditor per month is a simple way to ensure your debts will not get out of hand and impact your business in any way.
Take Care of Financial Issues as They Come Up
Overall, if any financial issues do happen to come up in your small business, take care of them as they happen. Taking care of all financial issues, in addition to these brief tips, will help you run your small business in an effective way while also managing all income.