But how do you do that when there is so much to handle? After all, you need to ensure that all employees are paid on time, that your inventory is well-stocked, and that you have enough cash flow to keep the lights on. The key to proper business finance management is organisation and planning. If you find it challenging to keep your business finances in check, consider using some of the following tips to get yourself on track.
Keep A Close Eye On Your Cash Flow
One of the most critical aspects of business finance is cash flow. This is the money coming in and going out of your company daily. You need to understand your cash flow to manage your finances correctly. Several software programs and apps can help you track your cash flow, so take advantage of them.
Also, with cash flow, you need to be proactive, not reactive. You can set up a system to log all incoming and outgoing payments. This way, you’ll be able to see exactly where your money is going and make adjustments accordingly.
Get A Loan Only When Necessary
One of the biggest mistakes small business owners make is taking out loans when they’re not necessary. Loans should only be used as a last resort, as they can put your business in a difficult financial situation. If you need to take out a loan, shop around and get the best interest rate possible.
There are many different ways to finance your small business. Be sure to explore all of your options before taking out a loan. If you decide to get a small business loan, you may want to talk to a reliable commercial finance broker to get the best deal possible. Plus, they can negotiate on your behalf to get you the best possible interest rate. They often have access to lenders that offer more favourable terms than banks.
Create A Budget And Stick To It
One of the best ways to manage your business finances is to create a budget and stick to it. It may seem daunting, but it’s pretty simple. Start by looking at your income and expenses for the past year. Then, create a budget based on this information. Include a buffer for unexpected expenses and some wiggle room for your monthly expenses.
Once you have your budget created, be sure to stick to it. It might not be easy, but it’s important to remember that your budget is designed to help you save money. If you find yourself struggling to stick to your budget, consider using some of the cash flow tips mentioned above.
Get A Handle On Your Inventory
Another critical aspect of business finance is inventory management. If you’re not keeping track of your inventory, you’re losing money. Period. That’s why it’s essential to have a system that allows you to track what you have in stock and what needs to be ordered. Several software programs can help you keep track of your inventory levels. Also, consider hiring an inventory management specialist if you find it challenging to keep track of your inventory on your own.
Keep Track Of Your Receivables
If you’re not keeping track of your receivables, you could be in for a nasty surprise. Receivables are the payments that you’ve invoiced but have not yet received. To correctly manage your business finances, you need to keep track of your receivables and pay them on time.
You can track your receivables by setting up a system where all invoices are logged. This way, you’ll see which invoices have been paid and which ones are still outstanding. You can also set up reminder emails or text messages to help you keep track of your receivables.
Use Financial Reports To Your Advantage
These reports can be a great way to handle your business finances. These reports can show you where your money is coming from and where it’s going. This information can be beneficial when making financial decisions for your business.
To create financial reports, you’ll need to use accounting software. This software will allow you to track all of your income and expenses and generate reports. Be sure to take advantage of the available reports, as they can be a great way to handle your business finances.
Have A Separate Business Bank Account
It’s essential to have a separate bank account for your business. It will help you keep track of your business expenses and income and help you manage your cash flow. Having a different business bank account will also make it easier to get a business loan, as lenders will look at your business bank account when considering you for a loan.
Have A Plan For Slow Periods
All businesses have slow periods, so it’s essential to have a plan for how you’ll manage your finances during these times. One option is to take out a line of credit or resort to inventory financing. It can give you some breathing room financially, and you can use it to cover expenses during slow periods.
Another option is to create a reserve fund. This is a fund that you can dip into when times are tough. To create a reserve fund, start by setting aside a portion of your profits each month. Then, only use this money when necessary.
Spread Out Tax Payments
If you have a lot of taxes to pay, it can be helpful to spread out your payments. This way, you won’t have to come up with a large lump sum of money all at once. You can arrange quarterly tax payments by setting up an instalment plan with the IRS. You’ll need to fill out Form 9465 and submit it to the IRS. Be sure to include your estimated tax liability on this form.
You can also make estimated tax payments throughout the year by filling out Form 1040-ES. This is a good option if you expect to owe more than $1,000 in taxes.
Managing your business finances can be a challenge, but it’s vital to ensure that your finances are in order. Create a budget, track your receivables, and use financial reports. You should also get a loan only when necessary and have a plan for slow periods. By following these tips, you can get your business finances on track.