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Owning a small business has its own share of tough parts, and one of the biggest challenges is managing the finances. Creating a well-thought-out budget is crucial for their financial success. A good budget can act like a map, giving a clear view of your finances—how much you earn, spend, and your overall financial health. It helps you plan for growth by wisely using your resources, making smart choices about investments and expansions.
When businesses fail to stay on a budget, things can go south very quickly. Limited funds make it tough to invest in crucial areas like marketing and technology. Uneven cash flow, common for small businesses, can make meeting regular bills like utilities, suppliers, or payroll a struggle. Many owners lack financial know-how, struggling with complex money matters. Unexpected expenses add to the strain. In this guide, we’ll share practical tips for managing finances smoothly, setting the stage for a robust financial future. Excited to get started? Let’s dive in!
11 tips for stress-free financial management
1. Track every penny: watch your spending
To effectively manage finances, closely monitor your spending habits. In a survey study, it was found that 84% of Americans who maintain a monthly budget admit to occasionally surpassing their planned spending limits. When it comes to business expenses, opt for accounting software automation. This streamlines expense monitoring and cash flow management. Accurate records don’t have to break your budget; there are several free accounting software platforms suitable for businesses.
2. Pay bills on time to avoid extra costs
Timely bill payments prevent unnecessary fees. Modern payment solutions for business payments like Forwardly can be a big help here to sort out your account payables. Forwardly’s instant payments not only simplify transactions but also help you and your vendors. Plus, with Forwardly you can set up automatic payments to avoid extra cost and keep your budget safe and sound.
3. Separate needs from wants
It’s common for our finances to get tangled when distinguishing between wants and needs. Don’t stress—it happens to everyone. Acknowledge the situation and take steps to better it. Focus on covering essential needs before indulging in wants to manage your funds wisely and improve your financial situation.
4. Regularly review your financial health
Regularly reviewing financial statements, budgets, and goals is crucial to manage finances effectively. If you find managing your money challenging, consider seeking assistance from business advisors or accountants. Their guidance goes beyond crunching numbers; they provide practical tips and insights to help your business thrive and succeed in the long run. They not only understand finances but also offer valuable advice tailored to your specific situation, contributing to the overall success and stability of your business.
5. Save for emergencies
Starting a small business is hard—18% don’t make it past a year, 50% fail at five years, and 65% at ten. These numbers show serious money challenges. Unexpected costs or shaky markets can wreck plans. That’s why having an emergency fund for your business is crucial. It helps handle surprises and keeps things going strong.
6. Don’t mix business and personal finances
It’s important to keep your personal and business money separate, especially with easy-to-use apps like Cash App, Zelle, and Venmo. These apps are quick and handy, but if you use them for both personal and business transactions, it can get confusing and cause security problems. If someone gets into your account, both your personal and business finances could be at risk.
Managing finances becomes easier when you maintain clear lines between your business and personal finances. Keeping distinct boundaries between your business and personal finances is beneficial in many ways. Firstly, it helps maintain financial clarity, making it easier to track business expenses, income, and profits. This separation also reduces the likelihood of errors in financial management, promoting accurate accounting and budgeting. Moreover, clear boundaries protect your personal assets and shield you from potential legal issues, ensuring the financial stability and integrity of both your business and personal life.
7. Use simplified forecasting tools
Take charge of your finances with user-friendly apps like Forwardly, offering cash flow forecasting for up to 12 months. It simplifies tracking and managing your business’s cash flow, offering real-time insights to tackle financial challenges. Make informed decisions, spot trends, and secure a healthier financial future. From payments to forecasting, these tools provide the info you need for stability and smart financial choices.
8. Regular book-keeping
Regular bookkeeping involves keeping accurate records of all your financial transactions, from income to expenses. This consistent tracking ensures that your financial information is up-to-date and accurate. Come tax season, having organized and well-maintained records makes the process smoother. It not only helps in fulfilling your tax obligations but also provides a clear overview of your financial health, aiding in strategic planning and decision-making for the future. In essence, regular bookkeeping is a proactive measure that contributes to the overall efficiency and success of your business.
9. Stay cautious with credit cards
Be careful with credit cards, even though the rewards can be tempting. Using them for business has downsides. High interest rates on late payments can mess up your budget. For small businesses, spending a lot on late fees can be financial mismanagement. Also, don’t overspend just because you think the credit card is a safety net. It’s important to be smart about it.
10. Invest wisely
When it comes to investing, being well-informed is key. Make informed investment decisions by researching or consulting a financial advisor. Diversify your investments to manage risks and aim for sustainable, long-term growth. Studies show that diversified portfolios yield an average annual return of 7-10%, enhancing your overall financial health.
11. Utilize instant payments
Streamline your business finances using instant payments as a smart strategy. While same-day ACH transfers may still take longer, especially outside regular hours or on weekends, Forwardly offers a solution. With Forwardly, receive instant payments, even during evenings and weekends, at a minimal cost of 1% (minimum $1, maximum $10 per transaction). No more grappling with hefty credit card processing fees. Forwardly processes payments swiftly, within 60 seconds, leveraging the RTP Service and FedNow Network.
Bid farewell to the hassle of late payments and give your business a shot at true financial stability. Try Forwardly today and do business better.
