Some small business owners are finance experts as well. They could have cultivated the skills through education, work experience, or inherent talent. However, they are more like the exception than the norm. Most business owners are good at starting a business, but managing finances is not their forte.
If you’re a business startup owner who has no experience in managing finances, you might find these tips quite helpful.
Article I. Why should you learn to manage your business finances?
Two of the primary causes of business failure are mismanaged finances and cash flow problems. The way to avert this is to have a flexible financial plan and achievable goals. You should be able to track your income and payables, control spending, and minimise financial risks.
Article II. Business finance management tips
One of the vital aspects of business is financial management. This business aspect refers to the planning, organising, controlling, and directing the company’s financial activities. Here are the things you should know.
- Separate your personal and business finances
It is never a good idea to mix your finances. You need to separate the two for tax and organisational reasons. It will be easier for you to manage the bookkeeping and accounting requirements needed to prepare business taxes, which are also different from personal taxes. Separating the personal finances from business finances protects the former in case your business encounters some legal problems.
- Open a separate bank account
Your business should have a separate bank account. It is easier to manage your business finances because you only have one account to track. It’s like installing a jersey barrier to prevent vehicle crossovers and minimise damage. When your business and personal finances are mixed, it makes you think that you have more money to use for the business than what you actually have. Further, check with your accountant or your financial consultant what type of business account you should have, but you should get an account that will allow you to manage your business finances daily.
- Learn to negotiate with vendors
Bargaining is an art. It is an important habit to cultivate since you want to get good products at a bargain. When dealing with suppliers and vendors, it would help if you do some background research on the products and the vendors, so you can make a deal that will be beneficial to you and the supplier. Remember to check purchase terms, such as grace periods and penalties for late payments.
- On-time bill payments
Some business owners procrastinate when it is time to pay the bills, especially when sales are not that good. However, that is not a good business practice. It will help your business if you diligently pay your bills so that you do not incur surcharges and additional interest for late payments. Moreover, when you postpone paying your utility and vendor bills, they only add up, which means the amount you’ll pay the next time will be bigger. If it becomes a habit, your suppliers may lose their trust in you and require you to pay upfront for the succeeding deliveries.
It will help your business to understand how to manage business finances, even if you have an accountant. It is easier to comprehend the terms and monitor the cash flow when you know the basics. Likewise, practice frugality. Looking for ways to save without sacrificing quality will go a long way toward steering your business to the path of success.