Many small business owners are driven by entrepreneurial inspiration to start their own companies. Small businesses drive new jobs and innovative ideas. However, for all the “pros” which accompany running your own business – the thrill of bringing a new idea to market, fulfilling a goal, flexible schedules – there are also challenges. Owning the business may be the simple part. Running it smoothly and profitably often can prove difficult. Following are five financial management tips that should assist in running your small business more effectively so that you can enjoy all the “pros” that influenced the decision to own a small business in the first place.
1 Develop a Budget – This is critical to the success of any business. A budget that lists your projected revenue and expenses serves as a road map in guiding business decisions and making sure you carefully consider financial decisions with the “big picture” in mind. When you create a budget, you can see the cash inflows and outflows. A budget functions as a financial barometer, allowing you to project accordingly, optimize and manage cash flow, as well as anticipate future financial needs.
2 Stay Abreast of Your Financials – As a small business owner, implement a routine practice of reviewing your financial reports. Staying abreast of your financials also equates to maintaining up-to-date accounting and bookkeeping records, as well as managing your expenses, payables and receivables. Timely and accurate access to updated financials allows you to make informed decisions quickly that could significantly impact your company’s profitability.
3 Retain the Expertise You Need – Recognize that running a small company or start-up does not require you to single handedly perform every function associated with that company. Focus your attention and efforts on growing your business. Establish partnerships with companies or contractors who possess expertise in areas at which you are not adept or those to whom you can outsource non-core tasks. This will be more efficient for you in the long run, as well as allow you to avoid costly mistakes that could occur by performing functions at which you have no experience. Leverage partnerships for CFO, CMO, IT or bookkeeping services to provide you with scalable access to expertise when you need it.
4 Invest in Technology – Recognize that investing in technology can significantly impact the infrastructure of a small business making it operationally more efficient. Use technology to automate processes wherever possible to reduce manual functions that take employee focus off of value added services. Accounting systems and software programs that assist with payroll, data entry or time and billing are examples of functions that can be automated with investments in technology.
5 Anticipate Changes – Above all, embrace the ability to be flexible and make pivotal decisions that can positively impact your business. One of the biggest “pros” of running a small business as well partnering with a small business is the ability to change directions quickly when deemed necessary. Anticipate and plan for change to remain competitive in the market.