Money Management Tips for Small Business Owners
Running a small business comes with its own set of obstacles. A small business owner may wear more hats than a CEO of a big corporation because small business owners often have a smaller staff. Fewer employees means fewer specializing job titles, and you, as the owner, are involved in more aspects of the business. This alone can confusing. When we start throwing money management into the equation, tasks and fund allocation can become even more confusing. Debt can accumulate quickly and be hard to pay off, so we want to provide some money management tips for small business owners.
Get a Money Planner
No need to have a unique planner for this; any planner will do. At the start of each month, you can even work a month ahead and write down your payment deadline and the amount owed. Be sure to not include account numbers for security reasons in case you ever lose your planner. This planner is only used for your business. By keeping your business and personal spending separate, you can better control both money management aspects of your life. Commingling funds can make tracking your spending difficult. Having a planner also allows you to follow when your payments are due or spending money for your business. While this is good for quick personal use, be sure you are also keeping a record of this in QuickBooks or another accounting system.
Set a Budget
Necessities and bills can pile up quickly within a business. Many paid-for services can help you run your business, but setting a budget for yourself can allow you to look at what you need to run your business. You can also feel secure knowing you are within your spending boundaries and nothing can surpass your control. To set a budget, there is some testing involved.
Start by calculating you monthly income. These sources can be paychecks, interest income, or rental income. Next, tallying up your total monthly fixed costs of your estimated production amount for your product or service. When accounting for your variable expenses, you will need to see what the average has been from previous months. Once you find that out, be sure to give yourself a cushion of an amount that is comfortable to you while keeping in mind that this part of your budget may need to adjust over time as your business grows. Now that you have built this, you can have your account to refer to for the next few months while you monitor your spending, and you can find a budget that sticks for the long term. The worst thing you can do is set too low of an account that you are continually exceeding each month and losing motivation to monitor your spending.
Have a Cash Reserve
Like your mom probably told you, “money comes and goes, and there is never enough.” This is precisely the reason you need to have an emergency fund. You never know when you will need it. As much as you try to predict everything for your business, there are some situations that no one can plan for. A cash reserve allows you to manage the unexpected in a stress-free way. This way, if a part of your production breaks down or you must shut down for a pandemic, you can float your business in the meantime while you assess your current situation.
Time Your Purchases
You may think this won’t make the difference, but often if you do not purchase until after halfway through the month, then it would not come on your next billing statement but the one after, and this allows you to get what you need in a given month while staying within your budget.
Similarly to our personal lives, there are always services we pay for, but do not use. Maybe we didn’t research the car insurance we chose to get the best plan at the most desired rate. There are always ways to cut costs. You should evaluate the expenses you incur on a monthly basis to see if there is spending going towards something you don’t need.
Money management allows you to feel secure in the thought that you are correctly allocating money within your business. Although the money management tips are not an end all be all solution to your spending, it gives you places to start and continue monitoring as your business evolves and grows.