A Guide to Small Business Financial Management

For many new business owners, the question of how to manage business finances can feel daunting at the beginning. But by employing some basic strategies and invoicing software, you can take charge of your small business financial management to ensure a profitable and sustainable model. In this article, we will explore five ways to approach your business finances to keep your company on track. 

Understand your business finances 

It may seem obvious, but the most important step in small business financial management is accurately tracking and regularly checking in on your financial reports. This means:

• Monitoring your cash flow and creating cash flow forecasts to ensure you will have the funds you need in the near future.
• Checking your profit and loss statement to see if your bottom line. 
• Developing an accurate budget based on past performance to guide your financial decisions moving forward. 

From there, you can establish reasonable goals that can serve as the basis for your business decision-making. 

Separate personal and business expenses 

This may also seem like a no-brainer, but it can be easy to blend personal and business expenses when running a business. Many small business owners forget to keep their business and personal expenses separate, or think a few blended expenses here and there won't make an impact. Merging the two is not only wrong from an accounting standpoint, but also makes it difficult to assess your business performance, profitability, strengths, and weaknesses. If you are the owner of a business, keep all business revenue and expenses in a separate business account, and you can pay yourself from your business account by taking an owner draw to your personal account. 

Find areas to cut costs

If you are closely tracking your business performance reports, you will be able to clearly identify categories that are draining your funds. Some common examples include dead stock, too much spent on labor, and inefficient processes that result in wasted time. To improve your business money management, choose an area where you can make changes, and always look to automate processes whenever possible using software, programs, or apps. 

Identify opportunities to increase revenue

Cutting costs is one side of the coin, but increasing revenue is another. Identify ways that you can bring in more sales without adding too many extra overhead costs. Can you open up an online version of the store, or sell add-on products or services that will increase the average order value? Look at ways to bundle existing products or create new services with existing resources. 

Automate your invoicing process

When it comes to small business financial management, one of the most important factors is to ensure you are actually receiving the funds you are owed. The invoice management process can be a headache for many business owners who dread chasing invoices and late payments. Modern Receivable can automate the invoicing process for your business so these time-consuming tasks run smoothly in the background.