3 Strategies for Managing Your Business Finances
Every small business owner, regardless of industry or company size, is responsible for completing a variety of tasks. While every task is important, one always stands out from the crowd: the successful management of your business finances.
This may not be the most exciting part of running a business, but it’s crucial to both your short and long term success. Unfortunately, many companies have gone out of business as a result of financial mishaps.
Before we discuss the three primary methods of managing business finances, let’s examine a few tips that will put you on the right path:
- Educate yourself. This means many things, but one of the best steps you can take is reviewing these financial documents: income statement, cash flow statement, and balance sheet.
- Don’t mix personal and business finances. A mistake that many small business owners make, this is one of the quickest ways to complicate your financial situation and cause unnecessary stress.
- Track everything. For example, make sure you know where every dollar is going as it leaves your business. Conversely, track performance in regards to revenue and profit.
These tips aren’t earth-shattering, but each one allows you to gain more control of your business finances.
With the above tips in mind, it’s now time to learn more about the three most common ways to manage your business finances. There is no right or wrong way of doing so, but most business owners find that one method suits them better than the others.
- Do It Yourself
Go back in time 20+ years and this was the preferred method of most small business owners. While things have changed a bit with the growth of technology, it’s still an idea to consider.
Generally speaking, this is a paper based system in which you only use the most basic technology.
Business owners who rely on this method still use paper files. They also collect receipts, send invoices by mail, and rely on filing cabinets to remain organized.
When it comes to technology, spreadsheets are king. With these, you’re able to eliminate some of the paper, all without getting too involved with software you may not understand.
There’s no denying the fact that most business owners are moving away from this strategy, but there are some who still feel that it provides the highest level of control.
- Hire a Bookkeeper
As noted above, small business owners wear many hats. You know this all too well.
For this reason, you’re always looking for ways to save time. One of the best ways of doing so is by hiring a bookkeeper.
The benefits of this method include:
- Less involvement with your business finances, resulting in time savings.
- Access to a professional who can answer your questions and provide guidance.
- More flexibility when it’s time to expand your business without having to be concerned with keeping up in terms of financial organization.
These benefits may have you leaning in this direction. However, you can’t hire just any bookkeeper. Instead, you need to hire the right person for the job. Here are some questions to help you narrow the field:
- Do you have experience working with companies in my industry?
- Can you provide references?
- What is your preferred method of bookkeeping? Paper based system? Software?
- What is your availability?
- How do you charge for your services?
Hiring the right bookkeeper could be the difference between financial success and facing a variety of challenges.
In today’s day and age, many small business owners are interested in saving time and automating systems through the use of software. There are many software applications for managing your business finances, with QuickBooks among the most popular. Here are some Quickbooks alternatives if that doesn’t suit your needs:
Focus on these details when comparing accounting software:
- Number of users
- Ease of use
- Payroll integration
- Credit card processing
- Mobile options
- Customer support
As you compare the use of software to other options, you’ll come across the following benefits:
- High level of accuracy.
- Ability to complete tasks in a shorter period of time (compared to a paper based system).
- Access to customer support and training.
- Advanced features, such as credit card processing and payroll integration.
- Option for more than one person in your company to use the software.
As you review what you’ve done in the past and compare the three methods detailed above, you can make an informed and confident decision regarding the steps to take in the future.
About the Author
Marc Prosser is the co-founder and publisher of Fit Small Business, a rapidly growing website that reaches over 700,000 small business readers a month. Started in 2013, Fit Small Business serves as the Consumer Reports for small business owners.