Being a boss and business owner demands a lot of responsibility, time and, of course, capital. Small and mid-sized businesses often operate with less resources which means that following these best financial practices to maintain financial health can go a long way.
All business success begins with education and leads to applying knowledge in practice, making mistakes and learning from them. Let’s take a look at some of the best business practices to follow if you’re running a SMB.
•Pay yourself: If you think that forgoing a salary or any form of compensation for your work to instead invest it in the business, then you’re missing a major fact. You are an essential piece of the business (especially in the early stages), so you should set aside some of the money to pay yourself for your time and work. But, you are not your business – that’s why you’ll want to separate business and personal finances (we’ll get back to this later). Paying yourself proves to be especially important in the case that your business doesn’t survive – you will need to have financial stability as an individual.
•Invest in growth: Now that you have some money set aside to pay yourself, you should also prioritize reinvesting profits into business growth opportunities. Investing in growth creates a domino effect. It shows customers that you care about your business long-term and it also signals to employees that you are invested in the health of the business.
•Spread out tax payments: That’s right – the only things certain in life are death and, you guessed it, taxes. Be prepared to pay your business taxes. If possible, it’s best to rely on an expert like an accountant or business financial advisor to help navigate these procedures. But, it could be the case that you don’t have the funds for a steady advisor. As such, be sure to set aside money for taxes as if it’s another operating expense.
•Monitor books: Keep a close eye on your financial documents. This is a tedious part of the job, but there are many software solutions on the market that can help automate most or all of this process. Bookkeeping will help you to not only be able to assess the financial health of your business, but it will help to avoid risk like fraud or theft.
•Plan ahead: You have a lot to manage in the present moment when it comes to finances, but as a business owner, it’s important to look ahead to the future. Being prepared for events down the line will help you better manage money today.
•Budget for marketing: This is vital. Most small business owners decide to forgo marketing costs because they seem like a big expense that’s upfront. However, without marketing, you will have a hard time to get your product or service in front of the people who end up being your customers. Not only is marketing essential for the survival of your business, but it also helps to boost stakeholders’ confidence in your business.
•Prioritize information security: The world is full of big data, and the amount of data grows everyday. Your customers’ and employees’ information is sensitive and deserves to be treated as such. Be sure to invest in software systems and third parties who can help to keep information secure.
When it comes to your business and money management, there are a lot of financial statements to keep track of. As a small or midsize business owner, prioritize the following documents:
•Cash flow: Cash enters and leaves businesses like water flows – swiftly and endlessly. Even if you’re running a profitable business, you must ensure that you have enough cash on hand at any given time (i.e. money in the bank). You can get cash from sales, loans, cash advances, asset sales, etc. Your cash flow statement shows you the inflow of revenue and outflow of expenses in a specific time period. Cash flow statements tend be generated monthly or quarterly.
•Balance sheet: Your balance sheet is one of the most important financial statements your business will have at any given point in its existence. A balance sheet serves as a snapshot of your business’ overall health because it reflects the assets, liabilities and equity you have. It’s used to calculate your business’ net worth. It needs to be maintained for accuracy because it becomes a regulated document for public companies.
•Income statement: An income statement is also known as a profit and loss statement. It shows your business’ revenues and expenses from the year (which are then used to calculate your net profit of loss). Income statement can help monitor your business growth over time.
•Revenue forecast: Revenue forecasts are a look into the future based on data from the past. Revenue forecasts help to predict how much money your business will bring in so you can assess what you can afford to do now and set budgets.
For tax purposes, the single most important action you can take when running a SMB is separating your business and personal finances. This involves creating a bank account for your business, as well as opening a business credit card.
When choosing a business bank account, be sure to consider: checking vs. savings accounts, monthly service fees, cash deposit limits, wiring limits, ATM access and mobile capabilities.
No matter how well you may care for the financial health of your business, you may need extra funding or quick access to capital. Uplyft Capital provides two services designed to help you access money fast. You can choose to take out a merchant cash advance with a program that fits your needs. Or, if you prefer to be matched with a loan provider, you can access our the Uplyft Marketplace that uses the power of automation to find a financial partner for you.
Running a small or mid-sized business relies on strong financial health. Begin by separating yourself from the business, in terms of finances. Then, follow the best practices mentioned above to keep you in healthy standing. The nature of business is ever changing, so if there comes a time where you require quick cash on hand, remember that Uplyft Capital is here to meet your needs!