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When running a small business, there are always too many things to get done in a single day. You often find yourself working into the early hours or at the weekends to keep up. Managing the financial side of the business is not always an area that gets the most focus. The belief here is that if the sales and marketing are on point, then the rest will take care of itself. That’s not always true.
To help out small businesses that have been a bit lax on the financial side, here are some tips to catch you up on some best practices.
Tracking Income and Expenses Closer
To avoid hitting a problem with either income being too low because of relaxing on the sales push or overspending with business expenses, tracking spending closer to real-time is needed. This might be the opposite of what many small businesses do where once a week or once a month is preferred. When using a backward-looking view, being too far behind proves to be unhelpful.
Use a software package that makes it quicker and easier to keep the accounts updated. Software like Xero is perfect for this. It’s also beneficial to use spreadsheets to project out income and expenses to get a forward-looking perspective too.
Review All Expenditures for New Efficiencies
When times were better, spending no doubt was freer and company dollars were spent at a faster pace. Less attention was paid to getting the best price or deal on purchasing because the main focus was on business operations.
However, now that’s changed; it’s necessary to tighten the purse strings by reviewing all upcoming expenditures to see where economies are possible.
Don’t forget the recurring expenses too. There may be one year or longer contracts in place for them where the pricing cannot be discounted yet. But see how soon they can be renegotiated and schedule a reminder for that date in your calendar app.
Handle Any Shortfall in Funding
When not paying attention to cash flows and what’s upcoming, it’s possible to see that the waters will become choppier in the future than in the past. If that’s the case, then it might be advisable to take out one or more short term loans.
A short-term loan is usually up to a year. It may be something that provides personal monies to sock away and then stop paying yourself a salary for a while. Doing this certainly will help reduce the strain on the company, and if you’re having to cut the hours of some staff to balance the books, it looks good to them too.
Reduce the Number of Growth Projects
Usually, there are a few initiatives to grow the business. Typically, companies have 5-10 of these on the go at one time. However, on average, only 1-2 find much success. Potential profits are frittered away in this manner because of inattention to the likelihood of success.
Protect any profits that may flow to the bottom-line by trimming back any growth ideas and increasing the certainty on the ones that are still being funded. Doing this avoids wasting money that could be used to increase capital reserves. With small businesses, financial management is a higher priority than owners give it credit for. Don’t make the mistake of discounting the advantage of strong business finances.