Financial Management Tips for Business Owners
As a business owner, you wear many hats. At one time or another, you may wear all of the hats at once. When you’re juggling staffing challenges, production, increasing expenses, and promotional opportunities, it’s easy to get lost in the shuffle. These five tips will help you manage a variety of aspects that affect your business’s financial success.
1. Keep an Eye on Accounts Receivables
An expanding business has to keep a good handle on their accounts receivable, as unpleasant as the role of debt collector may seem. At times you may find that long-term customers test their limits by stretching their payment periods. Newer customers may not be familiar with your payment process. Whatever the case, late payments or unpaid invoices are part of business ownership.
It’s important to be polite, yet firm, when pursuing payment. Your customers expect you deliver what you promise with your products or services on time. It’s fair that you expect the same courtesy from them.
2. Manage Debts
Almost every business has to seek financing at some point. Many new business owners take out a loan to help with start-up costs. Others may need a little help when it comes to new product launches or expansion. It pays to talk to the experts at your bank to get appropriate financing that you can manage.
The amount borrowed is only one part of the story. Always put careful consideration into an appropriate repayment schedule, and know exactly what incurring this debt will cost you in the long run.
3. Staff Strategically
Your staff should be your greatest investment. And like with any investment, you should see a return on what you put into them. For every member of your team, multiple costs exist apart from salary alone. Additional costs often include the actual space each occupies, the equipment and training needed for their role, taxes, and often health insurance and pension provision.
Consider all of your options before growing your full-time staff beyond what you can manage. Many businesses look to outsourcing to freelancers as a cost-effective option. While there is nothing like having a team member that is totally devoted to your business, sometimes parts of a single role can be farmed out to a range of different experts at lower overall cost.
4. Organize Your Files
This might seem like an insignificant key point in comparison to some others. Yet, imagine a simple scenario like this one: Jeff, a member of your team, is on vacation. One of his key clients needs urgent help. Yet you can’t find vital information because nobody else understands ‘Jeff’s filing system.’ When the customer can’t be helped in a timely manner, you might lose them. Few businesses, particularly new businesses, can afford to lose a client in a situation that could have been planned for and prevented.
Whether online or paper-based – invoices, client notes, and other important financial data should be filed in a way that allows you and other team members to retrieve easily when needed. A good filing system doesn’t just store your documents; it allows information to be found. Set up a solid back-up system, just in case your organizational method fails at any point. Many businesses now use cloud storage as a retrievable data source just in case a natural disaster occurs.
5. Understand Your Budget
Creating and following a budget will help you prioritize your spending, grow your income, and avoid unpleasant surprises. Write down a list of your expenses. Understand where your revenue comes from and how much income you anticipate. Break down and organize your income and output, then figure out if you have enough money to put towards other resources that will grow your business.
Once you’ve made a solid budget, review it often. Note any changes and make the adjustments needed. Make a plan for the event of an emergency. Sticking to a sensible budget will be key to your business’s financial health.
Herring Bank offers a variety of merchant services to our business customers. If you have questions about managing your business’s financial success with any of our merchant services, please call (888) 283-4564. A Herring Bank representative would be happy to help you!