Managing finances is probably not the most exciting part of owning a small business. But no matter what you sell, getting your finances in order is key to running a successful venture. Here are simple tips to help you manage the money and get organized.
1. Plan for the Future
It’s easy to get lost in the day-to-day tasks of managing business finances. But your best bet for sustained growth is to have a financial plan and stick to it. Financial planning analyzes current and future expenses and income to help determine the best plan of action.
A financial plan involves every aspect of a business from payroll to inventory purchases to marketing. This comprehensive article discusses how creating a revenue model and forecasting can help you plan for the future: Developing a Financial Plan for a Small Business.
2. Invest in Growth
One of the simplest growth strategies for any business is to simply sell more of its current product to its existing customers. Read about increasing sales here: 10 Tips and Tricks To Increase Sales For Your Small Business.
Other growth strategies involve creating new products or expanding your services. SmartBiz Loans customer Asha Waterstreet owns a shop in New York specializing in gourmet salts and vinegars. She received a low-cost SBA loan through a SmartBiz bank partner to expand her product lines to include tableware as well as hand-crafted body care. Read her story of successful growth here: Tasteful Additions: An SBA Loan Helped This Small Business Grow and Flourish.
You can also invest in growth by selling through alternative channels. For example, if you have a bricks and mortar location, consider selling online. If you sell online, consider boothing at local farmer’s markets, swap meets and other local events.
3. Manage Traveling Costs
Travel costs can add up rapidly. Overspending on luxury is not only a bad financial strategy but it sets a bad precedent for your employees. These days, there are tons of travel websites to help you get the best price available for flights, car rentals and hotels. You don’t need luxury when trying to manage costs of your business.
If you can hold a meeting remotely, you’ll save a bundle. Check out this article and determine if the ROI of travel will pay off: Virtual Meetings vs. Face To Face Meeting: Which One to Choose?
4. Consider Buying vs. Renting
Owning a commercial real estate property where you run your business isn’t for everyone. But if the circumstances are right, you can save money and build value for your business. According to one FitSmallBusiness financial expert, if staying in a building for more than 7 years, you are generally better off buying than leasing (from a purely monetary standpoint).
The longer you stay in the building the more the cost advantage for buying increases. For an in-depth look at purchasing options, check out the post Commercial Real Estate Loans for Small Business.
If you’re looking for low-rates, long terms and excellent customer service to guide you through the commercial real estate process, give SmartBiz Loans a try. We match you with the bank most likely to fund your loan, getting you to a “yes” faster. Our SBA preferred bank lenders offer loans from $500,000 – $5 million with low interest rates and a repayment term of 25 years, meaning payments are very low.
Learn how a real small business owner is using an SBA commercial real estate loan from a SmartBiz bank partner to fuel growth here: Business Story: Fun Bowl.
5. Manage Legal Fees
If you’re running a successful business, chances are you’ve needed legal advice or assistance. When working with an attorney, make your expectations of their service clear. Choose the billing option that is the most cost-effective for your business. That could be a flat fee, an hourly rate, or a retainer agreement. If using a lawyer for a specific initiative, request payment deferment until after your project is funded.
6. Monitor Financial Health
You might be measuring your business success based solely in terms of profit and loss.
This is important information for sure. However, you’ll get a truly accurate measurement of your company’s financial health by broadening the scope of your analysis. Large corporations have a Chief Financial Officer on board to crunch the numbers and look at performance.
As a small business owner, there’s a free online tool that can help you do that. Sign up today for SmartBiz Advisor. We help you learn where you stand for each of key areas banks use to evaluate your business, such as: debt coverage, debt usage, credit and business revenue trends.
7. Measure ROI
Return on investment (ROI) is a financial concept that measures the profitability of an investment. In a small business, the uses of ROI could be to measure pricing policy performance, the purchase of equipment or an investment in inventory. There are several methods to determine ROI, but the most common is to divide net profit by total assets.
8. Review Billing Processes
An accurate and efficient billing system is a must for a small business. It helps make sure you’re getting paid for the products sold or the work you’re doing. Produce clear and detailed invoices, invoice consistently, keep an invoice tracking system and go after late payments.
When creating an effective billing system, make the invoicing and billing processes as easy as possible for your customers and clients.
9. Don’t Wait Too Long to Seek Funding
An easy mistake to make is waiting until your business absolutely needs funds before applying for loans or other credit. Consider applying for a business loan when your financials are in good shape and your credit score is high.
You’ll get the funding faster and at better rates than waiting till the last minute when you might be struggling. Low-cost funds can be used for working capital, high-interest debt refinance, purchasing inventory, hiring, marketing, and more.