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Money Management: 10 Tips for Managing Finances for Small Business

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Only 40% of all small businesses are actually profitable. 30% are losing money and will most likely fail because the owner runs out of money. 

Being smart with your money as a business owner can mean the difference between success and failure with nothing but mountains of debt to as proof of your efforts. Knowing how to manage your business finances should be a top priority for all business owners. 

Yet very few business owners understand finances for small business. We want to change that. 

Keep reading to learn 10 tips on how to manage your business so it not only succeeds but stands the test of time. 

1. Managing Finances for Small Business Begins with Knowing Where You Stand Financially

Take some time to understand what the numbers are telling you. Add up how much money you earn every month. 

Figure out how much debt you currently carry. Get both your personal and your business credit score. 

Check and Fix Problems with Your Score(s)

Look at them both and see if there are any mistakes. Clear up any mistakes immediately.

Both your personal and business credit score will determine if you’re eligible for a loan. If your credit score is low, look for ways to improve your score(s) quickly. 

2. Prioritize Your Bills

Once you have an idea of where you truly stand with your business finances, it’s time to create a small business financial management system. The first step in doing that is determining your billing priorities. 

If money is tight, you need to know where to pay your money first so that your business can keep running until more cash flow shows up. Here’s the order you should prioritize your bills:

  • Taxes
  • Payroll
  • Aged Payables
  • Rent and Utilities
  • Vendors and Suppliers
  • Secured Debts and Personally Guaranteed Debts
  • Insurance Premiums
  • Large Bills
  • Small Bills
  • Credit Cards
  • Other Debts

If you are behind in any of these payments, the best way to handle it is to contact the creditor, explain your financial situation, and ask to negotiate a new payment plan until you’re back on your feet. Most companies are willing to work with you to resolve the issue. 

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3. Pay Yourself First

Many business owners forget to pay themselves a livable wage. Not paying yourself means you aren’t valuing your own contributions to your effort. 

And with no income coming in each month, you’re going to create problems with your personal finances. 

Do yourself a favor and guard yourself against any future problems by putting away 10% of your earnings in a separate bank account.

4. Keep Separate Bank Accounts

Many business owners make the mistake of not keeping their personal and professional finances separate. Make it easy on yourself so you can save and spend wisely. 

Get and keep separate accounts. It will be far easier to track expenses for tax purposes.

5. Pay Everyone on Time

If you fail to pay your employees on time, in some states, you can get penalized. Fail to pay your taxes on time, and you’re subject to fines and penalties. 

Other creditors will charge you interest and late fees. It’s much less expensive to pay everyone before or on the due date. 

One way to ensure you pay some of your creditors on time is to set up auto payments. 

6. Create a Good Billing System

While paying bills is one good way to manage your business, you also need to be generating money. The way you do that is by billing your clients/customers in a timely fashion. 

Make it easy on yourself and on your customers to pay on time and in full. Billsby helps you set up an easy billing system that’s customizable to your specific needs again. 

You’ll save a ton of time and effort by using a good billing system. This will allow you more time to be productive in other aspects of your business. 

7. Learn How to Save Money

Learning how to manage a small business means finding ways to save money. Learn to negotiate with vendors before you sign contracts to get a better deal. 

Determine what products you can buy in bulk. Eliminate any products or services you currently use that aren’t helping your business thrive. 

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8. Don’t Spend Until You Have the Money

Even if you just signed a contract with a client for several hundred thousand dollars, never assume it’s a done deal until you have the money in your checking account. Things change in business all the time. 

You do not want to spend money you do not have. Make sure funds are available before you spend money on anything. 

9. Make Financial Projections

Part of learning how to manage your business is the skill of making financial projections. Knowing how to predict how much money you’ll make in the near future can help you make smart decisions today. 

You’ll be able to make plans to boost your marketing efforts in order to generate more income. You can also use your financial projections to avoid potential obstacles. 

10. Learn Which Tasks to DIY and Which to Outsource

One way to manage your business effectively is to learn which tasks are better suited for you and your employees and which tasks absolutely must be performed by an outside vendor. 

Learnable Skills

It is possible to learn new marketing skills such as:

  • Blogging
  • SEO
  • Social media management

These tasks do not take up a lot of time and can be performed by almost everyone. However, you may want to hire a professional to handle building and maintaining your website. 

And while you may be able to do your own bookkeeping, especially if you use an online tool such as Quicken, it’s best to leave the accounting to the professionals. 

Learn DIY Marketing Here

Even if you do outsource some or all of your marketing, it’s important to understand the basics of marketing. Knowing what’s available and how each part can help your business will help you make smart decisions. 

Businesses can lose a lot of money on bad marketing strategies. If you’re serious about learning finances for small businesses, read more of our blog. We can help you learn the latest marketing strategies to help keep your income streams steady for years to come.