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financial tips 2023

9 Top Financial Tips for Small Businesses in 2023

2022 was no picnic for America’s small businesses. While many expected the year to build on 2021’s economic resurgence, global conflict and supply-chain issues drove rampant global inflation, which in turn forced most countries to slam the brakes on their economies.

The result? 2022 saw multiple quarters of economic contraction and only barely avoided an official “recession” categorization. That might only be a temporary reprieve, however — economists largely expect a U.S. recession in 2023, which means small businesses will have to remain as vigilant as ever.

It’s an admittedly tall burden. But today, we’d like to share a few financial tips that can put you small business on firmer footing.

The financial side of the business isn’t exciting, and it isn’t celebrated. Small business owners naturally spend a lot of time ideating new products, building sales teams and drawing up exciting marketing strategies.

But you can’t run a business for very long if you can’t pay your bills or figure out how much to send to Uncle Sam. So positioning yourself for success in 2023 also means making sure you have the proper financial foundation that will allow you to execute on all of your growth goals.

The following are a few pieces of advice as the calendar turns to a new year.

2023’s Top Financial Tips for Small Businesses

#1: Make a Budget … And Stick To It

One of the most cliché financial tips for small businesses is to create (and use) a budget.

That’s for pretty good reason.

Kicking off the new year with a freshly drawn budget is more than just a tone-setter. A budget is a blueprint for the next 12 months, outlining how you should spend money and what you can expect to bring in. A critical component of this is making an accurate revenue forecast; everything from your R&D spend to your profits flows from there.

Budgets also are useful when trying to raise funding. They can demonstrate to potential backers that you’re responsible with money and know how to plan.

But a budget is pointless if you don’t stick to it. Sure, budgets shouldn’t be written in stone, and you might have to make changes through the year as reality warrants. But the closer you adhere to your budget, especially early on in the year, the less likely you’ll face nasty financial surprises later on.

#2: Prioritize Cash Flow & Liquidity

Along the same lines, mind your cash flow and stay liquid as possible.

Economists, market strategists, virtually every type of money pundit you can find is predicting a recession in 2023. So while every business should still hope to grow profits in the year ahead, you can’t take survival for granted.

That makes cash flow — how much cash flows in and out of the business — king. A company that’s technically poised to be profitable across the year can still miss important vendor payments and default on loans if they don’t properly manage their cash flow.

Companies with heavily seasonal revenues are at particular risk here. They must plan carefully to ensure the cash from boom months lasts through thinner stretches of the calendar.

Liquidity goes hand in hand here, too. Just as important as having cash on hand is the ability to quickly convert some assets into cash.

Our advice: Cut costs where you can, and plan to run lean. But if the economy does prove to be more resilient than feared, be ready to pivot toward growth expenditures.

#3: Build an Emergency Fund

If there’s one area you probably should be spending more money in 2023 than in 2022, it’s your emergency fund.

Establishing a rainy-day fund is one of our recommendations for top financial habits for any small business owner. That’s because emergencies can hobble businesses of any size, but they can be downright fatal to smaller businesses.

How much any business needs will vary from one company to another. But the general wisdom is to pile up three to six months’ worth of operating expenses. An eye-opening amount, to be sure. But think of it as an insurance policy — one that could save your company in a downturn.

#4: Consider Credit Before You Need It

The worst time to ask for a financial lifeline is, ironically, when you need it. The time to pounce is when you’re at your financially healthiest.

So if you’re heading into 2023 with a head of steam, consider starting out the year by securing another type of financial backstop: a business credit card or line of credit. The latter is similar to a small business loan in that you can use it for virtually any regular business expense. But it’s more like a credit card in that the clock doesn’t start right away — you’re not charged any interest until you actually tap the credit line for funds.

#5: Make Sure Your Invoices Get Paid

Did you know that at least a quarter of American microbusinesses have been waiting at least a year to get paid on at least one invoice? So if you’ve ever dealt with unpaid invoices, you’re not alone.

But you’d also best believe that you don’t have the financial wiggle room to keep getting stiffed. So one of the best financial tips we can offer up is to make sure your invoices get paid.

We provide several ideas to get invoices paid faster, including simplifying your invoices and facilitating automatic payments.

#6: Pay Yourself

For many small business owners, this isn’t just a job — it’s a dream. Whether you had an idea you were driven to bring to life, or a group of people you wanted to help, chances are the motivation behind your small business isn’t simply getting paid.

But if we’re being real: It is a job, and you need to get paid.

You hear it all the time. A small business owner forgoes their paycheck for years, and struggles personally, just to keep their dream afloat. You’ll hear startup culture lionize these stories. But they ignore a harsher reality: Many people can’t be effective business leaders when their most basic needs — food, water, medical care, a roof over their head — are going unmet.

Take an income. And unless you want to work forever, save for your retirement, too.

#7: Keep Your Finances Separate From Your Company’s

Especially when you’re just starting out, it’s easy to treat your bank account like it’s also the company’s bank account. Bad idea. For one, commingling personal and business finances can cause massive headaches come tax time. You don’t want to confuse what you spent on yourself and what you spent on your company.

Even more critically, depending on your business structure, keeping your finances separated will keep you from being personally liable for any business failings.

#8: Set Aside Money for Taxes

We’ll see soon how accurate the prediction was, but Intuit anticipated 17 million new small businesses would be formed in 2022. A giant swath of these are going to be first-time entrepreneurs out on their own, and among the more mundane challenges that are easy to ignore: taxes.

One of the simplest things to overlook if you’re new to owning your own business is that, for most, taxes go from being an annual thing to a quarterly thing. The IRS has all sorts of resources to help you plan out your taxes, but in short: Make sure you’re aware of your new tax calendar.

#9: Don’t Go 2023 Alone

One of the best financial tips we can give any small business for the new year: You don’t have to be a solo act.

Hiring a professional, whether it’s to do your taxes or run your company’s entire accounting operations, has a laundry list of benefits. Whether it’s providing accurate budgeting and forecasting, helping to navigate licensing and permitting, or just saving you money on your annual taxes, it pays to trust the pros. And those are all things that the accountants and other business experts at McManamon & Co. can provide for your small business in 2023.

Put your company in the pole position as we start the new year. Reach out to us at 440.892.8900 or contact us online today.

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