Proper finance management not only stabilizes your business but also makes it less likely to fail. Small business finances management can be tricky especially for startups. The skills you bring to run and manage business operations is one of the reasons your business is successful and money management is one of them. If you don’t have enough expertise and skills to manage business money, you could be slipping into poor financial habits that can drive your business towards failure.
In this article, there are some proven ways startups can manage business money effectively for better financial health and ultimate business success.
Invest in a Quality Bookkeeping Software
If you are running a business with little financial know-how and skills, investing in quality bookkeeping software could help you do bookkeeping in the best possible way. It will allow you to record and manage finances on your own even without technical software operating skills and expertise. However, you should buy software according to the individual needs of your business to enjoy greater ROI. You can also avail of the services of a custom software development company to get custom software developed specifically for your company’s financial needs.
Keep Business and Personal Accounts Separate
Mixing up personal and business accounts is one of the major financial mistakes that most startups make and fail. Whether you need to pay the life insurance premiums or residential utility bills, don’t use your business money and pay them through your personal accounts. Also, don’t think that your personal money can be used to survive. Instead, keep business and personal accounts separate to enjoy better financial health. If you are about to use personal money for business, consider it as a loan or debt as it will keep your personal finances protected in unforeseen situations.
Don’t Be Afraid of Taking Loans
Loans can be scary when you don’t have a proper repayment plan. Applying for small business loans is one of the best ways to finance your startup and can help you make big purchases like equipment or other assets. Loans can also help you boost your cash flow for better business growth. So, do your research and find the best small business loan deals and get them whenever there is a need to raise business capital for good reason.
Maintain Good Business Credit
As your startup grows, you may need to make big purchases and take out more loans to meet the financial needs of your business. This is where a good credit rating comes into play and helps you get loan applications approved easily. That’s why you should maintain good business credit scores by making payments on time. Try to pay off all your debts, credit card payments, and other business payments on time to build good business credit. You can also use balance transfer credit cards to top up your other accounts and cards to make quick payments before getting late.
Build a Good Billing Strategy to Get Paid Instantly
Every business has some clients that are usually late on their invoices. This is where building a good billing strategy can help you get paid in a timely manner. If there are some clients who often make late payments, you should be creative regarding how you bill your lazy customers. As a result, you will get all the invoices paid on time without having an impact on your cash flow. You can also offer discounts or cash backs on prompt payments to get paid on time. It will encourage your customers to make payments immediately to get cashback or buy more in less. As a result, your business will have the good cash flow to meet all financial needs effectively.
Keep Tabs on Your Money Movements
Apart from the size and nature of your business, you should have payment terms and conditions outlined properly to stay on top of your business finances. Recording all your monetary transactions (both paid and received) helps you a lot in understanding how your business is performing. It not only keeps you updated on your business money movements but also plays a significant role in eliminating unnecessary expenses. Furthermore, previous financial reports and numbers can also be used to develop a better business budget for years to come.
Plan for Debt Reduction
Having an effective debt reduction plan is one of the best ways to manage business money as a startup. Debt reduction should be a priority for your business. Bad debts not only harm your business credit rating but can also cause stress. Try not to carry those bad debts into your business finances for years and create a plan to get rid of them off. Eliminating bad debts in a new financial year will allow you to have better financial health to attract more stockholders and get more funds for your business.