No serious business person likes to be strapped for cash, but one way or the other cash flow mismanagement happens. If you are struggling with managing your business finances, you’re in the right place. This article will walk you through some tips on how to manage your small business finances.
But before we dive deeper, what does financial management mean for small businesses? It’s simple! Financial management is the process of handling your business finances via tracking expenses and income, setting goals, and budgeting. With a sound money management plan, you can avoid periods of negative cash flow and ensure your business is on track to turn a profit.
Failing to wisely manage money can lead to problems like making late payments, running out of money, and not collecting on your accounts receivable.
How To Manage Your Small Business Finances
#1. Stay on top of deadlines
If you don’t know when your bills are due, such as accounts payable, business loan payments, or credit card payments, you might not have enough cash on hand. Not to mention, failing to know when bills are due can set you back with late fees or added interest, lower your business credit, and sour lender and vendor relationships.
To avoid missed bill payments, stay on top of your deadlines. Record when payments are due and set reminders so you don’t fall behind. Pencil in due dates on a paper, phone, or computer calendar and get on a consistent payment schedule.
#2. Monitor spending
Do you know how much money you spend per day, week, or month? If you don’t monitor spending, you could be racking up bills that you don’t need. And, failing to monitor spending can lead to overspending and misuse of funds.
Many business owners have multiple accounts, such as a checking account, savings account, and credit card account. Make sure you know how much you withdraw or spend from each account to stay on top of account balances.
#3. Separate business and personal funds
Do you have a separate bank account for business? Even if you aren’t required to separate business and personal funds, doing so is critical to money management. Plus, business bank statements are useful for tracking profitability, reconciling your books, and monitoring spending.