5 Top Financial Tips for Small Business Success in 2021
Small business owners have been baptized by fire in 2020. Companies across the U.S. (and the rest of the world) have been forced to deal with a health and economic blight unlike any seen in roughly a century.
As a result, many businesses have closed. Others are hanging by a thread. But those who can follow sound financial tips and advice in 2021 at least have hope to hang on to.
For the first time in about a year, the light at the end of the tunnel doesn’t appear to be a train. 2021 will be fast upon us, and as we write this, COVID-19 vaccines are beginning to be distributed across the country. While it will take time for “normalcy” to return, it at least appears to be en route. Thus, small businesses that can hang on for just a few months longer might finally get reinforcements … in the form of more customers.
Read on for some financial tips for small business success in 2021.
5 Critical Financial Tips
Build a Budget (Then Actually Use It!)
Year in, year out, we put building a budget among our top financial tips. But this move is so much more important as we head into 2021.
Even in the best of times, most successful companies don’t just “wing it” financially. They set up a budget at the beginning of the year outlining the various expenses they’ll need to cover each month, as well as what how much money they expect to bring in, and when.
But much like a diet or any other New Year’s resolution, making a plan doesn’t mean a thing if you don’t actually follow through. Make sure you’re comparing your actual results with your budget every month. That doesn’t mean you have to adhere strictly to the budget — you need to be able to roll with financial punches and unexpected windfalls alike. But the more closely you follow it as the year goes on, the less chance you’ll be discovering unexpected, unwelcome surprises come December 2021.
Prudent planning of revenues, profits, capital expenditures and cash flows is the key to staying alive in any year. But in 2021, when money is almost certainly tight, it’s just downright necessary.
Scrutinize Your Spending
If you had a difficult 2020, examine every line item as you build your 2021 budget. You likely were already forced to make a few impromptu cutbacks. But a disciplined, line-by-line scrutinization of your expenditures might yield more savings than you might expect.
Among a few things to consider? Be conservative about ordering extra stock, for one. You can’t afford to spend on things you can’t turn around and sell. On the flip side, people have become accustomed to longer delivery waits because of the pandemic, so if you need to order more stock to fulfill greater-than-expected orders, and it takes a few extra days, so be it.
Other considerations include continuing to digitize your business and trying to procure savings from vendors by sending more of your business to a select few. Though consider that last tip carefully; having concentrated supply chains has its downsides, too.
Put Your Bills on Autopilot
One of our favorite financial tips for streamlining your business is to automate your bill pay. This one simple move provides a number of benefits.
For one, it’s one less thing you have to think about month to month, as long as you’re typically on top of your cash flow. That’s time better spent on less mundane tasks.
But there are also small cost savings, in the form of stamps if you’ve been mailing your bills in. And if you set your automated bills to be paid early, depending on your vendor, you could even build up your small business’s credit score!
Keep Your Business and Personal Finances Separate
This step is one of the best financial tips for 2021, 2022 … you get the idea.
Given our accounting roots, we can’t help but point out that commingled accounts can make tax time a real pain. We’re not talking just annoyances; we’re talking a much higher chance that you could face an audit.
Keeping your finances separated also decreases the likelihood that you’ll rob Peter to pay Paul — in short, you’ll be less tempted to pull from your personal finances to bail your business, and conversely, you’ll be less likely to pull from the company’s coffers to temporarily fill a personal need.
And lastly, it gives your business a more legitimate appearance. Writing personal checks and making purchases on your personal cards simply looks less professional than using separate business accounts.
Plan for the Next Emergency
If your business has managed to survive the pandemic with minor scrapes, or better yet, if it has thrived, here’s a financial tip to consider: Build a rainy-day fund if you don’t already have one.
Hopefully the worst of COVID-19 is behind us. But, not to sound too pessimistic, it’s probably not the last calamity we’ll ever face.
Whether it’s a natural disaster, a disease, a recession or some other exogenic shock, your company likely will have to navigate another bump in the road sometime in the future. You’re better off prepared. Business insurance can help, too, as can other preparedness measures. But no one who has gone through an emergency has ever complained about having too much cash on hand.
2021 might very well be a tale of two years: continued hardship from 2020, followed by increasing opportunities that managed to weather the storm. McManamon & Co., which offers a wide array of business services to small- and midsized businesses, is here to help with every part of that journey.
Be prepared for whatever 2021 brings your way — call us at 440.892.8900 or contact us online.
Tags: budget, business interruption, financing, McManamon, McManamon & Co., small business, small business accounting, small business finances, small business financing, small business taxes | Posted in Financing, small business, Small business finances