How Would You Rate the Financial Well-Being of Your Business?
In 2015, researchers found that more than three-quarters of all small business owners rated the financial well-being of their business as excellent. If you were asked about the financial health of your business, would you be able to respond the same way? Running your own business is a risk. In order to succeed, it requires confidence, self-assurance, and a little bit of courage.
When starting a new business, there are countless decisions to make and hurdles to overcome, from deciding how you want to structure your business to figuring out who you want to hire.
At the top of the list, however, are your company’s finances.
Taking care of your finances is one of the most important parts of getting your business up and running.
To make sure that you keep your finances under control, check out these financial management tips for small businesses:
Give Your Business A Checkup
When you go to the doctor for an annual checkup, they start by measuring your vital signs. Your heart rate, body temperature, and blood pressure all provide vital clues as to your overall health. You can take a similar approach with your business.
Give your company’s financial health a checkup by evaluating your cash flow. How much money are you bringing in each month? Where is that money coming from? How much money is flowing out of your business? Where is that money being spent? Monitoring these factors is absolutely vital if you want your business to succeed – especially in the earliest stages of running a business when your company is still finding its financial footing. Although you can track your finances yourself using a software program, you may be better off hiring a professional accountant to help you instead.
Other habits that you use in your daily life can also be applied to your business. For instance, in your personal life, you probably do your best to avoid spending more money than you have coming in. This helps keep you from falling behind on your bills or going into debt. Taking a similar approach with your business by reducing your spending can dramatically improve your finances, as well. According to the State of Small Business Report, equipment upgrades accounted for 38% of the total expenses for small businesses.
Finding a way to reduce this number can save your business a lot of money. Take some time to evaluate your current suppliers. Anytime you purchase supplies or upgrade your equipment, compare prices to get the best deal possible. If you have been working with a particular merchant for a long time, you also may be able to negotiate a lower rate. This is especially true if they believe that you may take your business elsewhere.
Stay on Top of Invoicing
If you want to stay in good physical health, you need to take good care of your body by eating healthy foods, getting enough exercise, and managing your personal hygiene. Paying the same amount of attention to your company’s invoicing can have similar benefits from a financial health perspective. Not only can poor invoicing practices cost your business money, but they also can sour customer relationships. To keep from falling into this trap, focus on developing excellent invoicing habits. Be as straightforward and precise as possible with your pricing. Anytime you discuss pricing with your customers or clients, periodically ask questions to make sure that they understand what you are saying.
Whenever you get a new customer, conduct a credit check. Additionally, ask the customer to submit a deposit along with their order. In terms of billing, always send out invoices in a timely manner, asking customers to let you know when they receive them. Have a dedicated staff member who is responsible for keeping track of payments and reaching out to customers who have not paid their bills. To encourage people to submit payments by the due date, think about adding late fees for past-due payments. Minimize the risk of confusion by creating highly detailed invoices that are designed with clarity in mind.
Take A Closer Look at Your Insurance
An important part of protecting your health is making sure that you have a good health insurance policy. Even if you are healthy, you can get into an accident at any time. The same goes for your business. Even if everything is going smoothly with your business right now, accidents or unexpected problems can occur that wind up costing you a lot of money. To protect your business, invest in the right type of insurance for your industry. Depending on what type of business you own, this can include everything from liability insurance and property insurance to product liability insurance, car insurance, and worker’s compensation insurance. Even if you work out of your own home, you should consider buying an insurance policy specifically for home-based businesses.
Visualize Your Success
Some studies have shown that people who visualize themselves in better health often see improvements in their health in the real world. To apply this concept to your business, spend some time visualizing the future of your company. Where do you see yourself at this time next year? What about five or ten years down the road? When you visualize yourself reaching your long-term financial goals, you are a lot more likely to achieve them.
Be Open to The Idea of Growth
Keeping tabs on your income and expenses and maintaining good financial records makes it easier to spot growth opportunities. At least once a year, sit down and take a look at your company’s financial records. As you take in the data, consider your goals and objectives. This can help you identify areas for potential growth, allowing you to make adjustments as needed.
Consider Non-traditional Financing
Even when someone is doing everything right when it comes to maintaining their physical health, they still sometimes need to give their bodies a little bit of a boost by taking the right supplements or vitamins. If your company’s financial health has gotten a little bit off track or if you need some extra funding to get going, applying for a traditional loan or looking into non-traditional financing could be viable options. There are a lot of different types of loans available. To figure out which ones are most appropriate for your business, set up a time to meet with your banker. They can help you choose the right loan for your needs.
Maintaining the financial health of your business is all about educating yourself, tracking your progress, and having a plan.