10 Top Financial Tips for Small Businesses in 2024
The past two years have represented two very different environments for small businesses, but one thing remained the same. Firms with discipline and sound financial management were better suited to deal with the environment, whether it produced headwinds or opportunities.
So regardless of what 2024 has in store, you should pocket as many smart financial tips as you can. They’ll probably come in handy.
An extremely challenging 2022 was mercifully followed by a more accommodating 2023 — one that saw small businesses enjoy several sources of relief. The economy not only continued to grow, but it did so at a higher rate than most expected. That was thanks in large part to the American consumer, whose spending remained robust. And despite that, inflation — a top challenge for companies of all sizes — finally started to recede.
So, what can small businesses anticipate in 2024?
We don’t know. And you should raise an eyebrow at anyone confidently telling you otherwise.
For one, while some drags on businesses faded last year, not all of them did. Interest rates continued climbing and will remain high to start the year. While inflation is much closer to the Federal Reserve’s target 2% rate, there are concerns that a so-called soft landing could turn into a re-acceleration in 2024, prompting consumer prices to rise once more. A presidential election will throw even more uncertainty into the mix.
And underpinning it all is how even the best-laid outlooks can turn out to be flat wrong. Remember: 2023 began with many economists and wealth managers predicting a recession that never arrived. So while 2024 is again peppered with recession calls, you can take those with a healthy grain of salt.
Our opinion? You can’t control macroeconomic pressures — so don’t try. Instead, try to put your company in the best financial position possible.
To help you do that, here are several financial tips to set your small business up for success in 2024.
2024 Top Financial Tips for Small Businesses
#1: Make a Budget … And Stick To It
This financial tip is No. 1 with a bullet every year, and for good reason.
Kicking off the new year by creating a fresh budget is more than just a tone-setter. A budget is your 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. On the one hand, no budget should be written in stone — you likely will have to make changes throughout the year to reflect real numbers that arise. But sticking to your budget, especially where expenses are concerned, means less chance of facing nasty financial surprises later on.
#2: Prioritize Cash Flow & Liquidity
Like we said above, you can find plenty of recession predictions for 2024. So while every small business owner should aim to grow profits in the year ahead, you can’t take survival for granted.
Thus, cash flow — how much cash flows in and out of the business — remains 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.
Just as important as having cash on hand is the ability to quickly convert some assets into cash. Our advice: Cut unnecessary 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 2024 than in 2023, 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 2024 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
If you’ve ever dealt with unpaid invoices, you’re not alone. They’re an extremely frequent headache for small businesses.
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: Automate Your Finances
Something you can do to both make your records more accurate and save yourself some time is to automate your finances. Whether it’s payroll, bill payments, invoicing and other accounting and financial functions, accounting software and apps can help you do more, better.
#9: Set Aside Money for 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.
#10: Don’t Go Solo in 2024
One of the best financial tips we can give any small business for the new year: You don’t have to do it all alone.
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 2024.
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.
Tags: accounting, consulting, McManamon, McManamon & Co., small business, small business accounting | Posted in accounting, McManamon & Co., small business, Small business finances