Managing Small Business Finances 101


Mark Oswego

Dec 18, 2021


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Accounting & Finance

It's trite but true: many businesses fail because they fail to plan. Keeping your business going means understanding the financial basics of entrepreneurship, which are a lot more complicated than many new business owners believe. If you're feeling a little overwhelmed by it all, consider this your free small business finances 101 course.

Focus on Flow

Person managing the cashier

Cash is king, and you likely watched a lot of it fly out the door as you were establishing your business and getting things in place. Now is the time to get it back. Establish an efficient billing system early on so that your customers receive invoices promptly, and don't be afraid to ask for your money. Giving customers 90 days to pay is generous, but your cash flow needs may necessitate faster payments. Shortening your terms to the next 30 days may help you get cash more quickly, as can offering a slight discount for early payment. If a customer account is overdue, send a notice and attempt to collect.

Now that you have cash coming in, monitor it. Create a report that tells you how much cash you have, how much you expect to come in, and how much you need to pay out for expenses. Write it down on paper and look at it closely. Doing so will show you if you have a cash shortage coming and give you time to do something about it.

Manager calling their prospects

If you do see a shortfall coming, try spreading the word about your business and make sure you follow up on any and all leads. Call prospects back in a timely manner, increase your advertising budget, secure a loan or consider having a sale. Do what you must to get cash in your account and customers in the door before a period of slow cash flow creates a problem.

Budget, Budget, Budget

We're not going to lie — budgeting is boring. It will probably be one of your least favorite things to do, but it's absolutely imperative that you do it anyway. Budgeting is the cornerstone of small business finances 101. Write out your budget and then follow it.

Track all your expenses in your budget, from employee payroll to a new copier to the snacks you supply in the break room. If you spend it, track it. This accomplishes several things. For one, comparing your coming expenses with your expected cash flow is another way to spot potential cash flow problems. Writing it all down also helps you to remember upcoming expenses that you don't incur often, such as the repair bill for your company car.

Are things feeling a little tight? Looking at your budget in black and white can help you find expenses to cut. The opposite is also true, as seeing it all on paper may also make it easier to recognize a good opportunity to buy that new laptop or customer management software package.

Understand Your Tax Picture

Tax forms

Depending on how you've structured your operation, the tax bill for your business may be yours to pay personally at the end of the year. Many small businesses operate as pass-through entities, which means the business owner is personally liable for the business' taxes. Failure to understand and adequately prepare for this throughout the year can result in a big surprise at tax time.

Although your budget might be tight, don't scrimp when it comes to tax planning. Accounting software can do wonders for tracking your bookkeeping and finances, but the best tax and financial planning decisions are made with the help of real live CPAs who are on top of current tax laws and strategies. In the long run, a good CPA can save you much more than her services will cost you.

There is, of course, a plethora of other things you could learn about small business finances, and over time you're likely to pick up quite a few of them. But these are the basic building blocks of a solid financial foundation. You can achieve whatever you wish once you know how much money your budget requires and how much money you have coming in. Understanding your taxes is the cherry on top that can help you save money and avoid any unpleasant entanglements with Uncle Sam. When you're ready and your finances allow, reach out to us and let us help you grow your business with software to fix your business listings, social media and reputation management, professional website design, and more.

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