7 Great Financial Habits for Small Business Owners
Small business owners come in all shapes and sizes. Some are technological wizards who can take any idea and turn it into a program. Others have industrial smarts and know how to turn a picture in their mind into a finished product. Still others can do things with a kitchen that most of us could only dream of.
But all entrepreneurs should work toward having one shared attribute, if they don’t already possess it: great financial habits.
Whether you provide software, machinery or macaroons, you need to be able to do so in a way that keeps you financially solvent. But unless you’ve got the funds to keep a full-time accountant on staff – which many small businesses don’t – chances are you, as CFO (and CEO, COO, CTO and CMO), will have to make many of the big money decisions for your business.
And that’s why it pays to adopt several good financial habits, such as these:
- Make a Budget: If you’ve never done one before, here’s a quick primer on how to write a small business budget. In short, consider it a set of financial expectations that you should try to live up to throughout the year. You’ll want to forecast things such as revenues (how much you sell), expenses and profits (how much you earn once you back out all of your costs).
- Regularly Review Your Finances: Budgets are like New Year’s resolutions: They are only as useful as your follow-through. Regularly reviewing your finances and budget is a solid financial habit for small business owners. It’ll help you determine whether you’re on pace, ahead of the game or behind the 8-ball. But you don’t have to overwhelm yourself by checking in on every financial element of your business every day. Here’s a checklist of what you need to check up on and how often.
- Manage Your Cash Flow: One of the most important financials for any small business is your cash flow, which is the actual cash that’s coming into and going out of your company at any given time. After all, it’s great to score a contract that’ll pay you $200,000 in September, but if you have no cash in the bank to pay the bills in August, you’ve still got a problem. So keep an eye on your cash flow.
- Keep Debt Minimal: Small business debt isn’t bad. In fact, at some point, most companies have to take on some form of IOU to get over a growth hurdle, whether it’s to buy expensive equipment or execute the marketing campaign you need to get a new product off the ground. But every dollar you pay in interest is a dollar that could be going toward expanding your business, too, so try to keep your debt manageable and pay it off early when you can. This isn’t a one-size-fits-all piece of advice. Some types of businesses simply have to take on more debt to get up and running than others, so “minimal” really is relative to your ability to pay it.
- Save on Taxes Where You Can: Minding your taxes is one of the best financial habits a small business owner can pick up. Even though tax strategies can be easy to execute, they can be difficult to formulate, which is why it’s smart to pay for professional tax services from a firm that can help you plan well in advance. Knowing the various tax breaks and deductions available to small businesses can result in thousands of dollars of savings across the year. That’s a significant amount of money you can put to work in a host of ways.
- Pay Yourself: Money gets tight for almost every small business at some point or another, and many owners toy with the idea of making a personal financial sacrifice for the good of the company. But underpaying yourself as a small business owner can actually do more damage than you think. Chances are you’re the driving force behind your firm, which means if you put yourself through undue financial stress, you might not be fully focused on the task of building your business. Don’t be a martyr; pay yourself.
- Don’t Put Everything on Your Shoulders: No small business owner has enough hours in the day, so spend what time you do have on what you’re best at. While great financial habits will help you keep a hand on your company’s financial steering wheel, trusting an expert is one of the best ways to maintain control at all times. McManamon & Co. – a full-service accounting, tax, fraud, forensic and consulting firm – offers numerous ways to lift the burden, whether it’s accounting services, such as maintaining records and creating financial statements, or consulting services, such as hashing out cash flow and tax strategies.
Begin building great financial habits today, and you’ll be ready to make delicate financial decisions going forward. You can start by calling us at 440.892.8900 or contacting us online to get a financial professional on your side.
Tags: accounting, budget, consulting, McManamon & Co., small business, small business accounting, small business finances, small business taxes | Posted in McManamon & Co., small business