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Starting a small business and managing it successfully involves numerous challenges. However, there are some easy steps you can take in your daily management to ensure your business is thriving rather than merely surviving. Here are some practical tips that will help you manage your money more effectively on a day-to-day basis.
1. Keep Your Personal and Business Expenses Separate
There are many reasons why it’s important to have separate business and personal accounts. These include personal liability, tax management, and maintaining proper accounting records. When things take a turn for the worse, resist the temptation to use personal finances to secure business funds. That’s because that eventually creates a mess that is difficult to resolve.
The most effective way of keeping personal and business expenses separate is creating a business budget and a separate personal budget. Sticking to these budgets strictly will make managing your money in both arenas simpler. In other words, make sure that you don’t use funds you have set aside for business purposes for personal expenses and vice versa. You’ll thank yourself for not jumbling your records when the time comes to do the accounting and pay your taxes.
2. Don’t Sign Contracts with Vendors Before Negotiations Are Complete
At times, you have to dig a little to get a good deal. When getting into contracts with suppliers and purchasing from vendors, try pushing for a good bargain. During negotiations, take keen note of the purchasing terms such as grace periods and late payment penalties. For example, an additional 30-day grace period might make managing your money easier than would a 10 percent discount.
3. Make Managing Your Finances a Breeze by Paying Your Bills on Time
Being diligent with paying your bills is just as important in business as it is with personal finances. What’s more, late payment fees on loans and credit cards can be expensive. Likewise, consistently paying seemingly small late fees on utility and vendor bills can add up for your business. Managing your taxes is no different. For example, late payment on your taxes can lead to enormous penalties.
Ensure that you don’t inadvertently neglect any of your business bills by creating timely monthly reminders. That’s because profit margins can be especially thin for young businesses. Therefore, avoiding late payment fees and penalties can make all the difference.
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4. Make a Habit of Being Frugal
Adopting a frugal approach does not mean skimping on important business expenses. A good example of frugality could mean going green to minimize costs on utilities. Additional examples include buying major equipment and furniture secondhand. Further, following through on mail-in rebate offers for office supplies and equipment could bring your small business some small change at the perfect moment.
5. Take Time to Learn Some Basic Accounting
Having the title of small business owner does not necessarily mean you’re always good with managing your money. However, you’re still responsible for making the business decisions related to money. So even if you hire an accountant or a bookkeeper, it’s imperative that you have some working knowledge of accounting.
If necessary, take an online introductory accounting course to understand your business’s cash flow. Having a good understanding of cash flow and business finances equips you to make smart decisions when managing your money.
The Bottom Line
Following these tips gets you started on the right path. What’s more, you will greatly improve your chances of success. However, keep in mind that nothing can replace taking a hands-on, proactive approach to managing your business finances regardless of the size of your business.