Whether you like them or not, finances are a necessary part of running a small business, so to get some insight on effective procedures that entrepreneurs can adopt to improve their money management we’ve compiled our top five tips for all small business owners:
- Don’t mix business and personal expenses.
There are so many reasons not to mix your business and personal accounts, including tax issues, personal liability, and jumbled accounting records, just to name a few. When things get tight, resist that urge to secure your business finances with personal funds. It may give you that quick fix you need at the time but it will no doubt create a mess that you are only going to have to deal with at a later date.
The best way to maintain a clear separation of your expenses is to set yourself a personal budget and a business budget. Try and adhere to them strictly and separately so that credit cards and loans for your business don’t get used for your personal finances and vice versa. Your bookkeeper and accountant will be eternally grateful if you separate the two when it comes to managing your books and paying your taxes.
- Negotiate with vendors before signing!!
Sometimes you have to do some digging or shopping around for a good bargain. When making purchases from vendors or contracting with suppliers, try negotiating for a better deal.
Also please don’t forget to examine purchase terms like late payment penalties when making a decision. You don’t want to be caught out at a later date.
- Pay your bills on time, every time.
Treat your business bills as you do your personal finances. You don’t pay personal finances late so business payments shouldn’t be any different.
Credit card and loan payment late fees can cost you dearly, but paying small late fees on vendor and utility bills consistently adds up, too. The same goes for taxes: paying too late can result in serious penalties.
It can be beneficial to set up monthly reminders to make sure there are no business bills falling through the cracks. For young businesses especially, the profit-loss margins are thin. Avoiding late fees could be the difference between ending the year in the red or in the black.
- Be a little Frugal.
Okay, we aren’t expecting you to become an extreme couponer like the ones on American tv shows to save money on ordinary business expenses but we do suggest that you follow through on rebate offers for office equipment and supplies, buy furniture and major equipment secondhand, and go green to save money on utilities.
- Spend some time on an accounting refresher.
Being a small business owner doesn’t automatically make you a money whizz/expert, but you’ll still have to make big money-related decisions for your company and understand how cash moves in and out of your small business.
The more you understand your business finances and cash flow, the better prepared you’ll be to make smart money management decisions. And, while these tips will get you started, nothing replaces being proactive and hands-on when it comes to managing your money—no matter how big or small the financial challenge. If you need help with your business finances then please do get in touch with us here at DNA Accountants we are always happy to talk business.