It’s not uncommon for small business owners to groan loudly when finances are mentioned! Sure, some people love looking at all things money and numbers, but just as many owners would rather stick pins in their eyes!
Managing your business finances is an important task though, as it keeps your business running smoothly and helps you achieve any growth goals.
So just how do you plan your finances in a way that works for both your business and your personal money goals?
Identifying your financial goals
When you’re a small business owner, it’s imperative that you watch your finances closely so that you are able to plan ahead to achieve your goals.
Your financial planning strategies should lead to building a strong, profitable, and scalable business while also working towards safeguarding your personal finances.
It’s good also to reflect on your business goals and the finance side of those goals.
Here are some great questions to ask yourself when planning your financial goals:
- Are they achievable this fiscal year or do they need to be pushed next half?
- Can they be planned now and scheduled for later?
- Can you get going with any investments now and set up a payment plan to get your goals moving ahead but in a way you’re capable of spending?
- How are your projections doing – take note? did you achieve your plans up to now? do you need to do a little push to get you across the line in the next few weeks?
Take time to think about what you want your business to achieve and to outline your revenue and profit goals, but also look at your personal goals.
- Think about how you want to live day to day
- Plan any investments you want to make
- Think about when you want to retire
- Any other personal financial goal
Then, make sure your small business strategy supports those personal goals.
Top tips for planning and achieving healthy financials
The key to achieving financial freedom often lies in planning, investing, and assessing.
1. Manage your cashflow to avoid the cycle of ‘feast or famine’
Often small business owners can be caught in the ‘feast or famine’ cycle, which leaves you vulnerable to emotional or desperate decisions.
A healthy cash flow will help you to feel safe that your business is profitable and that you can meet all your financial commitments such as payroll, buying equipment, and paying your tax bill. An unhealthy cashflow will leave you vulnerable and your business will stall.
Get into the habit of carrying out a cash flow analysis regularly. This helps you identify trends in your cash flow and can help you learn how much to set aside to manage any future issues.
2. Pay yourself!!!
Too many business owners forget to pay themselves or don’t realise how much (or little) the business is making.
You’re working hard, so you must pay yourself at least market rate for the work you do. If you’re noy paying yourself, you won’t be getting a true picture for your business finances.
3. Manage taxes
Tax-planning can help prevent a nasty shock each financial year, but also assist with reducing any unnecessary tax bills.
While we all agree we much pay the tax we owe, you’ll be kicking yourself if you end up paying more that you needed to.
Outsourcing tax planning and preparation to a qualified certified public accountant (CPA) or other financial professional who may be helping with your business will not only free up time, but that expertise may reduce your tax liability.
4. Look into funding and investments options
Why not investigate bank loans, angel investors, and government grants? By accessing extra funds you can put back into your business and grow and scale.
It’s important to assess the pros and cons of each funding source, and to also evaluate the benefit they can bring to the business.
5. Educate yourself on risk management
Identifying and mitigating risk is something every small business needs to do, but it can feel like a big, scary thing and so we put it off.
Of course, it’s not possible to predict every crisis or risk that might come your way, but there are some obvious issues that you can plan for, such as you becoming unwell and unable to work, increased interest rates that affect any loans, a cybersecurity issue, or a natural disaster.
Having some contingency plans in place will soften the blows that come from these issues and help you get back on your feet without too many lasting consequences.
6. Create succession and exit plans
You might not want to think about succession or exit plans – this business is YOUR baby after all!
But you really can benefit from taking the time to consider what option you might have for selling your business, passing it on through a succession plan, or simply walking away.
When deciding whether to sell, close or pass along the company you’ve built, think about what you would want on a personal AND business level (are you happy to just walk away with all the assets, or do you want to sell for a good price?)
7. Outsource where you can, hire when you need to
Newsflash!!! You can’t always do it all yourself. I know you’re amazing, you’re passionate, and at times the thought of paying out money to have someone else do things for your business feels counterproductive.
But, by being smart about hiring the right help, you can really grow your business.
For example, a great VA can help you manage your diary and your inbox, offer you project management support, assist with keeping your accounting up to date, and can even help with personal tasks.
Train your employees well, or look for the right contractors, and you’ll soon notice how much extra time and space you now have for actually making more sales, and more money!
8. Invest in Marketing
Another area where you sometimes have to spend money to make money. Marketing and promotions are a vital area to focus on if you want to have a thriving business. But you need to know how much you can invest and what the returns on those investments might be.
9. Look for the ‘easy wins’
Sometimes being money smart isn’t all about big investments or complicated strategies. Often, good money management comes from the small wins you can leverage.
- look at your claimable expenses – if your business needs to purchase goods, you should do within the right time frame to get the taxes back in the year
- stop unnecessary subscriptions/tools/software’s
- consider new implementations of processes or platforms that will help streamline any repetitive tasks, or save you money in the long run
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