Financial health is vital for businesses to succeed and grow. No matter how famous your products are or how big your revenue may be, poor financial management can still take you down the path of failure. So, if you’re running a small business, it’s best to practice effective expense management as early as now.
There are many ways to accomplish this. It all starts with assessing your cash flow and expenses and taking the necessary steps to balance the money coming in and out of your business accounts.
Here are some do’s and don’ts to take note of for small business owners who aim for good financial health:
- Do Cut Unnecessary Expenditures
Startups usually have limited funds in the first few months of operation. So, cut unnecessary expenditures to make room for more essential business tasks. Start with small perks or extras that you can do without when making your first cut.
While a corporate card can support your daily to monthly expenses, it’s important to learn how to limit expenses so your financial records remain healthy. Here are some areas where you might want to cut your budget:
- Travel
If your employees need to travel from one place to another for business reasons, it’s understandable to set a budget for that. However, you should assess the importance of such travels carefully. Check out which of your tasks can be easily done remotely. This way, you can help cut travel expenses. The budget you would’ve had for it can then be redirected to important things like training and order processing.
- Team-Related Activities
It’s good to maintain a high level of morale in your office, especially when you’re still starting out. Team-building activities are specifically made to reach this healthy work culture. Unfortunately, when it’s not carefully planned and sorted, they could turn into money sinks.
Some team-building activities require a lot of money, especially those that involve booking venues, spending on food and drinks, or using company vehicles. The good news is that there are alternative cost-friendly ways to hold team-building activities. It’s a matter of creativity and reasonable spending.
- Do Follow Deadlines
As a business, you’re financially tied to obligations like credits, business loans, salaries, and tax payments. If you don’t keep tabs on when you have to make payments for all of them, you might end up having to pay more because of penalties and interest. Therefore, you should always be on top of your deadlines.
Never avoid your bill payments. In fact, assign someone in the finance department to monitor your company’s financial obligations. Have them keep track of due dates and set reminders for payment. By doing so, you’ll be able to maintain a good reputation and healthy relationships with partners, vendors, employees, and creditors.
- Do Invest In Growth
Setting aside money and researching growth opportunities are important. As a small business, you should be open to finding more ways to expand and stand out from your competition. Always be on the lookout for opportunities to solidify your future.
Whether you’re investing money in better customer service or advanced tech and tools, they’re all good decisions since they can make your business more effective and efficient. You get to provide a higher level of service to your customers while also earning the appreciation of your employees for investing in their careers. Such an investment always yields high returns in the long run.
- Don’t Combine Owner And Business Accounts And Finances
In the early stages of a business, many owners put their personal and business accounts together. This is a common mistake. Keep your business account separate from the personal accounts of owners and employees, and be sure to make it the norm.
By keeping your actual and business accounts distinct and organized, tracking and monitoring cash flow becomes easier. You can also improve your business loan eligibility by having all the documentation separate from personal money.
- Don’t Forget Your Receivables
If you follow a business-to-business (B2B) model, chances are you’ve agreed to some payment terms for your clients. It’s important to never forget your receivables. Be vigilant with your payment collections, as you need to be liquid for your business operations. Pursue payments owed to your business if you want to manage your money better.
Keep a record of your receivables in your books to make it easier to track them. Assign someone to be in charge of your account’s receivables, and make a separate system that will allow everyone to monitor which collections were paid and which were not. Make a summary report at the end of the month.
If customers forget their due dates, you can implement ways to remind them about their credits. Some simple invoicing upgrades and late notices can be sent to customers to pursue payments. As for late payments, you can charge a penalty or interest. But make sure you set this out in your pay arrangements first.
Be Smart As A Small Business
Incremental growth is just around the corner if you know how to manage your business expenses. These tips should get your enterprise started on a healthier cash flow and cleaner balance sheets. The key is to use your corporate cards and cash effectively to avoid unnecessary expenditures. Be smart, and don’t hesitate to talk to the experts for more advice.