6 smart money management tips for handling your business finances like a pro
Want to learn better ways to manage your business money? Read this article for six smart money management tips that will teach you how to manage your business finances like a pro!
Whether you own a small or an established business, you probably know that smart business finances management is key to your success. Healthy money management is essential both when it comes to personal and business finances, and it’s the only real efficient way to stay away from debt and financial problems. Business owners wouldn’t like to be strapped for cash, especially when dealing with an emergency. But, poor financial management can lead to such instances.
Now, properly managing your money has plenty of benefits. Not only is your business more stable, but it is also less likely to fail, even during difficult times. What’s more, when you stay on top of your business finances, you’re also set for growth and further investment.
That being said, let’s explore our six smart money management tips for handling business finances like a pro!
1. Keep your personal and business money separate
Mixing personal and business money is a frequent mistake small business owners make. And, very soon, they find themselves confused about expenses they no longer remember. Separating business and personal funds is critical to good money management for many reasons, including:
- You can track your business profitability properly
- You can reconcile your books
- You can monitor business spending more efficiently
When you combine your two funds, chaos is bound to happen. You can no longer track personal and business expenses correctly. Plus, you may also be prone to dip into your business funds for personal expenses or vice versa.
2. Budget like a pro
Budgeting is a golden rule for smart money management. In essence, budgeting is all about monitoring and tracking your money correctly, whether that means incoming or outgoing funds or investments.
Putting in the time to create budgets, monitor them, and improve them is a great way to simplify money management and make it more efficient. Budgeting helps you set expense and revenue goals and understand where your money goes or comes from.
Budgeting doesn’t have to be so scary. At its most basic nature, it only means keeping records of income and expenses. From there, you can dig deeper into how your financial situation allows you to grow or meet specific goals.
3. Pay off debt
If you’re like the average small business owner, you’ve probably made some huge financial efforts to start your own company, including borrowing money from financial providers or your friends. Now, as your business is on the right track, it is time to get more serious about paying off your debt once and for all.
Debt is never good news, both for personal and business finances. Debt is a slippery road that can make you fall several times. More precisely, while in debt, you’re more likely to create more debt in difficult times or if an emergency happens.
In contrast, when you’re debt-free, you’re more likely to get through difficult times without feeling the pressure to borrow more money. So, if you want to escape this vicious circle, you need to pay off your debt as soon as your business finances are on the right track.
If possible, redirect a big part of your profit to paying off debt. Once you’re done with giving back the money you owe, you can use your profit for further growth opportunities. However, taking new business risks might drag you into more significant debt until you’re debt-free.
4. Familiarize yourself with money management tools
Back in the days before technology was so widespread, managing business finances was a professional’s job: an expert accountant. Today, with so many money management tools at your fingerprint, literally, you can keep track of your business money on your own.
From budgeting apps to accounting software tools, there are various technological solutions that allow small business owners to manage their finances wisely, even without the help of an expert accountant.
As the experts from Quickbooks explain, “Technology in finance empowers entrepreneurs to handle tasks like data storage, file management, data reporting, and financial estimates while saving time and money. In short, technology offers business owners control over their finances more efficiently.”
It’s never been easier to stay on top of your company’s finances. Multiple apps and software for accounting allow you to input your monthly revenue and expenses and generate a budget that will enable you to make informed financial decisions for your business.
5. Cut costs to increase revenue
Like all business owners, you’re probably constantly looking for ways to increase your revenue. Here’s one way: decrease expenses and increase income. Easier said than done, right?
However, cutting down business expenses can be easier than you imagine. Sometimes, it can be as easy as choosing to work with a cheaper supplier. Or, you can renegotiate with your suppliers for smaller costs. You can also make your business more efficient to cut down costs. For example, you can cut down on energy expenses.
Now, the smart way to cut down expenses involves some research at first. It’s not wise to simply cut down your marketing budget or fire an employee. Such decisions may fire back. Instead, analyze your business expenses and identify the areas that could cost you less without negatively affecting your business.
You can also increase your profit by offering discounts, promoting your products/services more efficiently, and selling new products.
6. Have an emergency fund
If there’s one thing that businesses worldwide learned at the start of the COVID-19 pandemic, that’s the fact that there are many crises you can’t predict or control. And, for those crises, any business, small or established, needs to be financially prepared.
Think about it: an internal or external crisis that affects your business and revenue could last for months. Is your business prepared to fund itself and survive on the market despite the crisis? If not, it’s time to start an emergency fund and redirect a part of your profit there.
An emergency fund can literally save your business in case something goes wrong, and customers stop showing up at your door for a couple of weeks or months.