Finances are a crucial part of small business operations – you are in business to make money; otherwise, you’ll be running a charity. Money is the lifeblood of business and your business is not likely to succeed if you don’t have a clear picture of the financial health of your business per time. Knowing all there is to know about your business finances will help you to keep your cash flow running smoothly. You’ll also find it easier to avoid business debt and you’ll ultimately run a profitable company that is able to expand and grow.
Below are 3 tips that could help business owners stay on top of their businesses finances.
Separate personal and business finances
Most small business owners are sole proprietorships, family businesses, or a business venture between friends. Hence, it is often easy to lose sight of where your personal finances ends and the business account begins. An important financial knowledge that could increase the odds of your business success is to resist the urge to mix up business finances and personal finances. Sometimes, you just need a few hundred dollars to meet a personal expense and the cash register looks like the perfect lending machine.
However, mixing business and personal finances usually ends up in a financial mess that is often stressful to sort out. You’ll end up with complications in your taxes, personal liability, incoherent accounts records, which can in turn make it difficult for you to secure loans or get investor funding.
Review the cost of getting paid
The world is gradually moving into a cashless economy and many small businesses are getting paid electronically than in cash. In fact, E-commerce has become a serious competitor to brick and mortal retail stores; and now, retailers must accommodate the needs of customers who want to pay with plastic. Point of Sale (POS) terminals, mobile payments such as Square, and contactless payment solutions such as Apple Pay and Samsung Pay are some of the latest payment solutions.
However, small business owners must always review the cost of being paid in order to ensure that a large part of their profit doesn’t filter away as transaction processing costs. You’ll need a merchant account with payment processers who will charge you a fraction of sales as commissions. A regular review of the offerings from different credit card processing companies will help you get the best value without paying too much in transaction costs.
Pay all bills on time
You business will be a customer to other business, corporations, and government agencies; hence, you can reasonably expect to have some bills to pay. Starting with utility bills, you don’t want the bills to pile up because they have an unassuming way of sneaking in on you until they become a large bill. When they do become a large bill, the utility companies will always be breathing down your neck or transfer your debt to debt collection agencies who are not usually civil in their practices.
You also don’t want to miss taxes because you can’t escape the payment of taxes and the late payment often attracts penalties and fines. The worst part is that such fines would eat into your profit margins. You may want to consider setting up an automated bill payment schedule or monthly reminders to attend to the bills before they pile up.