6 Essential Tips for Small Business Owners

Maintain cash flow and keep an eye on profits with these five essential tips for small business owners from The Bank Engine. A successful business will ensure they have enough available resources to create products, pay staff, and market their ideas, but this can only be achieved through clever budgeting and smart software solutions. 

Set a budget 

Budgeting helps you keep your eyes on the prize. Before you start your business, you must set a budget with a forecasted idea of your expenditures. Your budget should show how much your outgoings will be on a yearly, monthly, weekly, and daily basis. You want to create a financial reporting system that forecasts, tracks, and monitors your resources. 

To set a budget, take a look at how much you will spend on products, staff, promotion, and fixed items such as rent and utilities — then track how much you sell. Your budget isn't flexible — this is a fixed amount that you can spend on outgoings if you are to keep your business afloat.

Properly monitor your cash flow 

Many businesses often fail because they don't properly monitor their cash flow. As a small business owner, keeping on top of what monies come in and go out is vital. Use accounting software with a reporting tool such as QuickBooks. Robust accounting software allows you to monitor cash flow trends, drill down into specific cash flow categories, and review benchmarks from certain periods. You should check your accounts daily to ensure that you stick to your budget because if your revenue stream falters, you need to know about it immediately and have a backup plan for when things go wrong. 

Have a financial backup plan

Every plan needs a backup. Having a solution in place if you need to borrow extra is prudent — a credit card on file, a pre-approved loan, or even a family member who may be willing to step in if the situation requires. The U.S. Small Business Administration has advisors who can aid you in getting a loan. 

Pre-approved financial aid will help ensure that you have a competitive payback rate with a low APR. Fast loans and quick-fix solutions are always available at a price, but you want to avoid extra costs that could have been avoided with forethought. A small business needs to ensure that any money borrowed is done with the least cost to your business, so shop ahead to get the cheapest rates for borrowing, even if you are confident that you won't need it.  

Smart invoicing

Invoice your customers promptly — the sooner, the better. A 30-day payment term may seem like a lifetime when you don’t have enough cash flow to buy new stock. Invoice straight away and offer discounts for early payments and penalties for late ones. 

Make your business official

Get your ducks in a row by setting up a Limited Liability Company (LLC). An LLC takes less than $1000 to set up and works to keep your business safe by protecting your personal assets from legal issues associated with your business. In the unlikely event that things take a downturn, your personal finances remain separate from your business entity, and the IRS or an angry client can’t claim for them as part of business arrears.

Master Marketing

Marketing is essential for any business. Your fabulous ideas won't gain traction or popularity if people don’t know about them. Marketing done effectively is a game-changer that can increase sales and drive profit. 

The catch-all term ‘marketing’ can seem intimidating but it has never been more simple to promote your business. One of the cleverest marketing moves is to start a website or blog. At the very least you should launch a Facebook, Twitter, and Instagram page. Consider running promotions on social media, promoting your website on Google with paid-for advertising, or even posting flyers in your local community. Your marketing budget doesn’t need to be huge if you use creative solutions to drive traffic to your business. 

The secret to managing your cash flow effectively is careful planning. Remain mindful of your budgets and have a system in place that monitors your finances. Cash flow may be the least sexy of your business practices but it is, without a doubt, the most important. 

Need to get a better handle on your finances, both business and personal? Start by reading The Bank Engine’s guides!

This article was written by Amy Collett of bizwell.org