Simple steps you can take to optimize your business' financial health.
It's hard to prioritize as entrepreneurs.
If you’re an entrepreneur like me, there’s a good chance that you spend more time than you want putting our fires, dealing with staff issues, endless emails and administrative tasks.
While most small business owners say they wish they could spend their time strategizing, reviewing their trends and financial data and planning for their future, the reality is that most of us who run a small business spend the majority of our working ‘in’ our businesses rather than ‘on’ our businesses.
When it comes to managing your business finances, it’s important to have systems in place and best practices that are simple to execute, allow you to take money out of your business and keep your credit, cash flow and growth going!
Check out this infographic and tips below!
1. Pay Yourself First:
Figure out what is an appropriate amount to pay yourself by determining how much you need to take out of your business. Then, pay your expenses.
If you don’t have an automatic withdrawal for yourself set up, there will always be some expense that comes up and stands in the way of you taking money out of your business for yourself.
At Money Mentor Group, we can help you figure all this out! You can schedule a free Clarity Call with a Financial Coach by clicking here.
2. Invest in Growth:
In addition to paying yourself, set aside money for future growth initiatives.
You should always be planning for the future so that when an amazing opportunity arises, you have the financial resources to go for it.
You may want to expand your team or buy out a competitor or simply add another product line. Keep dreaming big but have the money ready to pull the trigger.
3. Keep Good Business Credit:
There will come a time when you’ll need business credit for something, whether it’s to finance an expansion of some kind or to buy a building or capital equipment for your business.
Just like with your personal finances, having good credit will impact your ability to qualify for this financing and will determine your interest rate.
What impacts your business credit? Your personal credit! So pay your bills on time, even if you cannot pay in full. And never charge the maximum amount allowed on a credit card!
4. Have a Business Emergency Fund:
Just like you need an emergency fund in your personal life, you need one for your business.
Now, you might be thinking “What kind of business emergency would I have? I have insurance in case of theft, fire, water losses and liability so what else could there possibly be?”.
Think in terms of what could disrupt your business and put you in a cash flow crunch. Maybe your best lead source dries up and you need an emergency fund for a few months until you find a new source of leads.
Maybe your key employee quits and you need some cash flow until you find a replacement. Maybe you have a once-in-a-lifetime opportunity for your business that you want to do.
All these will end up on a credit card or being financed if you don’t have an emergency fund for your business.
5. Spread Out Tax Payments:
If you find yourself scrambling each quarter to pay your business taxes, why not set up a monthly payment system? By doing this, your tax payments simply become another monthly expense that you can budget for.
You’re going to pay the same amount but from a mindset standpoint, breaking this into smaller chunks will do wonders for your financial management.
6. Monitor Your Books:
So what financial reports should you be monitoring on a consistent basis? And how often?
Set aside time each week to look at your books, even if you have a CPA or a bookkeeper. Look at outstanding invoices, your Profit and Loss statement, your payroll, and your revenue at a bare minimum.
This also helps avoid potential criminal activity from employees, business partners or vendors.