Finances are the lifeblood of your business: you need a steady flow to stay healthy and grow. Knowing how to track and manage money is critical for small business owners. Sharp financial skills let you increase profits, gauge performance, and make decisions about where your time and funds will generate the highest return.
Fortunately, You don’t have to be an accountant or bookkeeper to manage your finances effectively. Here are a few easy principles you can incorporate into your existing routine to make better decisions and head off problems before they happen.
Consider Time and Profit
You probably already review your financial performance periodically to see which of your products and services bring in the most revenue. But it’s also important to factor in time when evaluating your business’s top performers.
Imagine that one service brings in $1,000 a week but requires 100 hours to complete, and another service brings in $500 but requires only 10 hours to complete. The second service brings a much greater return for your time. You may want to consider expanding your base of clients for this service rather than the more time-consuming one.
Negotiate with Vendors
Before signing a contract, always negotiate where possible. You may be able to secure a discount, more flexible payment terms, or other favorable terms in the deal.
The worst that can happen: they say no.
The best that can happen? You end up with a better deal and earn the respect of your suppliers by demonstrating your professionalism and negotiating ability.
Never Mix Personal & Business Accounts
Mixing personal and business accounts does more than make a jumbled mess of your bookkeeping: it opens the door to personal liability, tax issues, and other problems down the road. Keeping personal and business accounts separate will save you from headaches, fines, and an unpleasant visit from the IRS in the future.
Always keep personal expenses– food, clothing, apartment rent, bills, etc– on your personal credit and debit cards. Similarly, only make business-related purchases (inventory, equipment, software, office rent) using your business lines of credit.
Not Good with Numbers? Outsource to an Expert
While you may feel pressured to wear every hat as an owner, you’ll find greater success when you play to your strengths. If you’re not good at organizing receipts, maintaining spreadsheets, tracking transactions, or other aspects of tracking your financial performance, it is probably best to hire an accountant or bookkeeper to handle those aspects of operations for you.
Even better, an accountant worth their salt can find deductions and tax credits that provide additional value for you. Where possible, hire an accountant with expertise in your industry so they have the best chance of finding savings opportunities for your individual situation.
Do you often find unsold inventory sitting on your shelves? Or do you find yourself scrambling to keep popular products in stock and miss out on business?
Keeping track of your inventory can help you find a happy medium so you’re not tying up capital in inventory unnecessarily. By keeping an eye on the numbers, you’ll be able to spot buying trends and prepare for them– for example, certain products may have a bump in sales during certain seasons or around particular holidays.
The Bottom Line
The more you understand about your business’s finances, the better decisions you can make. By paying attention to the numbers, you can increase profit, save time, and even get a better picture of your customers’ behavior.
Want to Get in the Fast Lane for Financial Success?
Want a guide to help you understand your finances? In EnrichHER’s 5-week Business Financing Accelerator, you’ll gain access to spreadsheet templates for tracking revenue and expenses, learn how to estimate projections and plan for the future, and gain access to office hours with experts who can make the numbers make sense. Click here to learn more and enroll in the next cohort.
EnrichHER is a financial technology platform that matches revenue-generating companies led by women and founders of color to individual and institutional sources of funding. Since 2017, EnrichHER has deployed upwards of $4 million through its platform and matched business-owners to $13 million in working capital through its Accelerator. By providing capital, coaching, and connections, we are fueling the fastest-growing demographic of business owners. Our network has engaged with over 23,000 advocates through its digital community and in-person activations.