The global pandemic has been detrimental to businesses of all sizes, but small businesses are the ones who got affected the most. Many small-scale businesses have shut their doors permanently, while others are hanging on by a thread. If your small business is struggling to stay afloat, it’s important to be mindful of your spending.
In this article, we’ll share some money management tips to help you keep your small business mending. Suggestions like reducing expenses and finding new sources of revenue, these tips will help you weather the storm and come out on the other side.
1 Create a Budget
Making and keeping a small business budget will help you manage your money more effectively. You can set goals for expenses and income using a budget.
The funds necessary to operate your organization are to be included in your budget. You can better manage your spending money when you are aware of your spending limit.
A budget also estimates the funds that will be generated by your Business. If you learn that your revenue is less than expected, look for ways to decrease spending and increase sales.
2 Stay on Top of Payment Deadlines
One of the most important things you can do to keep your small business afloat is to stay on top of deadlines. This means setting reminders, making lists, and staying organized. It also means knowing when to delegate tasks to others.
Financial management is another critical aspect of keeping your small business afloat. This includes knowing when and how to spend your money, as well as creating a budget. This may seem like a tedious task, but it’s essential for ensuring that you have enough money to cover your expenses and keep your business running.
3 Monitor Spending
Do you keep track of your daily, weekly, and monthly spending? If you don’t keep track of your expenditures, you might be accruing bills that you can do without. Additionally, failure to keep a focus on spending might result in overspending and financial misuse.
Several business owners maintain numerous accounts, including credit cards, savings, and bank accounts. To keep a record of account balances, be sure you are aware of the amount you withdraw or spend from each account.
You should take uncashed checks into account when preparing and reconciling statements. The recipient of a cheque is not required to cash it right away. You can end up with an overdrawn account and overdraft fees if you refuse to keep track of your expenditures.
Manage your accounting records to keep track of your spending. Accounting transactions can be recorded using readily available accounting solutions. You can easily keep track of your expenditures when you keep a record of your outlays.
4 Don’t Forget about Accounts Receivable
It’s important to keep a close eye on your accounts receivable (A/R) in order to maintain a healthy cash flow for your business. Here are a few tips to help you manage your A/R:
● Understand your rights:
Familiarize yourself with the laws in your state regarding A/R so that you know your rights as a creditor.
● Keep good records:
Make sure you keep accurate records of all invoices and payments so that you can easily track your A/R.
● Send invoices promptly:
Send invoices as soon as the work is completed so that you can get paid sooner.
● Follow up on late payments:
If payments are late, follow up with the customer in a polite but firm manner.
By following these tips, you can keep better control of your accounts receivable and ensure that you are paid on time.
5 Time your Purchases
Plan out your purchases to prevent low cash flow situations. Wait until you’ve finished paying your bills before making unneeded purchases. Wait until you’ve got enough money on hand to meet any additional expenses.
Additionally, you can plan your purchases to lower your tax payable. You might think about investing in tax-deductible items (like supplies) before the year ends so you can write them off on your tax return.
6 Separate Business and Personal Funds
One of the most important money management tips for small business owners is to keep their business and personal funds separate In Accounting terms, this is known as the Separate entity Concept. This will help you stay organized and keep track of your personal expenses and your business expenses. It’s also a good way to protect your personal assets in case your business runs into financial trouble.
There are a few different ways you can go about separating your business and personal funds. You can open a separate bank account for your business, or you can use a business credit card for your business expenses. You can also set up a system where you track your expenses and income separately.
Whichever method you choose, make sure you are consistent with it. This will help you stay on top of your finances and avoid any costly mistakes.
7 Manage inventory
If your business has a monthly budget and you need to track the inventory level of your product, this tip will help you get started. A simple inventory management system at hand can make it easier for every small business owner to keep track of inventory and stay on top of their finances.
Do you place excessive orders for inventory, only to have it remain in your storage space collecting dust? Or do you consistently turn away customers because you are unable to keep up with demand for your products? You can manage money in your small business by managing inventory better.
To avoid crossing the difficult line between having too much inventory and not enough, keep track of the amount you have in your company. Keep track of inventory purchases and sales in your books, and before placing another order, Stock Management techniques like FIFO (first in first out) LIFO (Last in first out), or weighted average method can be used to enhance your stock management skill. In addition to that, Supply orders should be calculated using the “Economic order quantity” method to be cost-efficient.
8 Cut Costs and Increase Revenue
It’s a fact that starting your own business is one of the biggest financial risks you can take. However, it can also be the biggest turning point in your life in a positive manner. This can be especially true for small businesses or growing businesses that have a high burn rate and need every penny to survive. You don’t want a business model where all you do is work harder than everyone else and spends your time working on the next idea or project with no notion of getting it going in a period of months or years. After all that, not been able to close out the year on a high despite increased revenue.
Keep up-to-date accounting records if you want to make managing your money easier. You can track cash inflow in and going out, keep an eye on receivables, send invoices, and be more with Patriot’s online accounting software. Following these tips can help you and will ensure that your small business stays on track and afloat.