While there are several challenges to starting and sustaining a small business, the majority of small business owners focus on financial issues. Dealing with these issues can seem complicated. However, there are also some easy things you can do in the day-to-day administration of your company to improve your finances.
Here are some tips by Bill Schantz to assist you in avoiding some of the most common financial mistakes made by young business owners and learning financial management for startups:
Never Delay the Payments on Your Bills
It is absolutely vital that you pay all of your business bills on time, just like your personal bills. Late costs on credit cards and loans can easily add up, but so can late fees on vendor and utility bills. Taxes are the same way as failing to file them on time could result in hefty penalties.
You can set monthly reminders to ensure you do not miss any company expenses. Remember, profit margins are razor-thin for young businesses in particular. Avoiding late fees could be the difference between making a profit and losing money at the end of the year.
Set an Emergency Fund Aside
An emergency fund can assist you in escaping a difficult situation when it comes to financial management for startups, suggests Bill Schantz. Multiply your monthly spending by six to ensure you have enough money in your emergency fund to cover your business and personal expenses for a month.
During lean months or when unexpected expenses happen, you may need to dip into your emergency funds. Make sure you replenish this money on a regular basis to pay for unexpected bills.
Monitor Expenses and Never Spend Future Money
You can risk the future of your business if you do not keep track of your spending. Furthermore, failing to keep track of spending might result in overspending and poor financial management.
Many business owners have multiple accounts, including a checking account, a savings account, and a credit card account. Paying for small expenses with your company credit card, debit card, or checks is simple. However, this piles up your debt and bills that you will have to pay with accrued interests. The general rule of thumb here is to only spend what you have as hard money.
Keep a Close Eye on the Inventory
In order to avoidcrossing the narrow line between having too much and not enough inventory, keep track of how much you have at a given time. Monitor your inventory purchases and sales in your books, and make sure you order exactly as much as you need.
The Final Verdict
The more information you have about your company’s finances and cash flow, the more prepared you will be to make sound financial decisions. When it comes to financial management for startups, Bill Schantz believes that being prepared for any unforeseen situation is the best strategy.
These tips will get you started, but nothing beats being proactive and hands-on with your company’s finances at all times. Good luck!