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Congratulations on becoming your own boss! You’ve done the hard work of gathering information, building strategies, and securing funds. Now it’s time to expand and elevate your business. While running a new business brings excitement, passion, and the potential for significant rewards, it also demands smart financial management to avoid common pitfalls.
Cash flow management and forecasting: A must for success
Cash flow problems are a leading cause of small business failures. In fact, 82% of businesses that fail cite cash flow problems as a major factor. Effective cash flow management and cash flow budget are crucial for understanding your working capital and planning for future expenses. Use tools like Forwardly to get insights into your past, present, and future cash flow. Forwardly helps you:
- Monitor and manage your cash flow with ease.
- Improve your accounts receivable with instant payments in just 60 seconds for a 1% fee capped at $10, or opt for free same-day ACH transfers.
- Manage your payables efficiently by scheduling bill payments right on the due date, allowing you to hold onto your cash longer. Bill payments are free and only take 60 seconds to process.
Tracking and monitoring spending: Stay on top of your expenses
From startup costs to ongoing expenses, tracking where your money goes is vital for maintaining financial health. Knowing your spending patterns helps identify areas for improvement and ensures you stay aligned with your financial goals. Here’s how to keep track:
- Record every expenditure and save receipts.
- Cut non-essential expenses.
- Use accounting software such as QuickBooks Online, Xero or FreshBooks.
- Keep personal and business finances separate.
- Identify tax-deductible expenses.
- Consider hiring an accountant or bookkeeper.
Maintaining cash reserves: Be prepared for the unexpected
Many Americans struggle to cover a $1,000 unexpected expense, and small businesses are no different. Having a cash reserve is crucial for handling emergencies and managing unforeseen costs. Aim to save enough to cover three to six months of expenses. Here are some tips for building and maintaining cash reserves:
- Automate your savings.
- Keep at least 10% of annual revenue in reserve.
- Save your tax refund and use cashback credit cards.
- Cut back on non-essential expenses and business trips.
- Use cash flow management tools to plan for potential scenarios.
Managing debt: Balance your borrowing
Debt can be a double-edged sword for small businesses. When used wisely, it can provide the capital needed for growth, expansion, and seizing new opportunities. However, mismanaging debt can quickly lead to financial strain and potentially jeopardize your business’s stability. Ensure that you:
- Understand the terms and interest rates of any loans or credit lines.
- Avoid over-leveraging your business.
- Prioritize paying off high-interest debt first.
- Regularly review your debt obligations and adjust your strategy as needed.
Forwardly can help
Making smart financial choices is crucial for your new business’s success. By focusing on cash flow management, keeping an eye on your spending, building up your cash reserves, investing wisely, handling debt effectively, and setting the right prices, you can set your business up for long-term growth.
Forwardly is here to help you with all of that. We simplify managing your accounts receivable and payable, help you get paid faster, and keep your cash flow in check. With Forwardly, you receive funds instantly—under 60 seconds, 24/7/365—and enjoy seamless payment workflows with automated reconciliation and integration with QuickBooks Online, Xero, FreshBooks, and Zoho Books. It’s all about making your financial life smoother and more efficient at no monthly subscription cost.
Ready to transform your financial management? Explore Forwardly today and see how we can streamline your cash flow and support your financial strategy.
