6 Tips for Managing Your Business’ Finances

So, you possess a remarkable business concept that stands unparalleled. You’ve dedicated countless sleepless nights to devising impactful marketing tactics. Your vision board is brimming with schemes, and the success of your venture is something you can vividly picture.

But is that enough?

What if, despite having the best strategies in place, your business hits rock bottom because of poor financial management? Does the thought terrify you?

The truth is that even the most groundbreaking businesses can fail if their finances aren’t managed smartly.

Let’s dive into some game-changing tips that can transform the way you handle your business’s money and ensure the prolonged success of your startup.

1.   Consider Earning an MBA  

While it may sound counterintuitive for a business owner, earning a Master of Business Administration (MBA) can provide you with in-depth insights into the financial intricacies of running a business.

Let’s be honest: you may not be an expert at managing finances, and that’s okay. Many entrepreneurs excel in creativity, innovation, or marketing but struggle when it comes to deciphering balance sheets, understanding financial metrics, or navigating investment strategies. That’s where an MBA can bridge the gap.

Through structured coursework, case studies, and real-world financial simulations, an MBA program will enable you to make strategic financial decisions and navigate the uncertainties of the market. It’ll also increase your credibility when seeking funding or partnerships.

You have two options to choose from when exploring MBA programs:

  1. Go for a general MBA online to gain a holistic understanding of business management.
  2. Choose an MBA concentration that best aligns with your goals. Think business analytics, cybersecurity management, healthcare marketing, etc.  These can help polish your skills in specific areas of business management.  

2.   Maintain Good Business Credit

Your business credit score greatly impacts your ability to secure loans, acquire insurance policies, set favorable terms with suppliers, purchase commercial real estate, and establish trust with partners.

Here’s how you can improve your business credit score:

  • Dedicated business bank accounts keep your finances organized and demonstrate financial responsibility to creditors.
  • Pay all your business bills promptly. 
  • Regularly check your business credit report for any discrepancies and address them immediately with the respective credit bureau.
  • Establish credit terms with your suppliers because they may report payment histories to credit bureaus. Consistently paying them on time can boost your credit score.
  • The length of your credit history can affect your score. So, keep older accounts open, even if you don’t use them often.

3.   Spread Out Tax Payments  

Tax is an inevitable and often hefty expense that can take a big bite out of your profits if not managed wisely. One surefire way to make it more manageable is by distributing it over multiple smaller payments.

The benefits:

  • Improved cash flow throughout the year.
  • Reduced anxiety about a looming tax deadline and the associated large payment.
  • No penalties on late tax payments.

Here’s how you can do it smartly:

  • Estimate your annual tax liability.
  • If your jurisdiction allows, break your tax bill into four manageable chunks or make monthly tax payments.
  • Use accounting software that offers tax forecasting to get an accurate picture of your tax obligations based on real-time financial data.
  • If your business experiences seasonal fluctuations, save a little extra during high-revenue periods to cover leaner months.
  • Consult a tax advisor or accountant on the best strategies to optimize deductions and ensure tax compliance.

4.   Keep Money Aside to Invest in Growth  

Growth requires investment. Whether it’s expanding to a new location, launching a product, or hiring talent, you’ll need funds.

Follow these tips to seize growth opportunities as they arise:

  • Set up a separate bank account for growth-related expenses to avoid dipping into operational funds.
  • Determine a fixed percentage of monthly or quarterly profits to transfer into your growth fund.
  • Don’t take on debt unnecessarily. Use your growth fund for planned expansions to avoid high interest rates and preserve cash flow.
  • Plow back a portion of the profits into the business to sustain growth without external borrowing.
  • Spread investments across multiple growth avenues to mitigate risks while prioritizing high-ROI opportunities. 

5.   Devise a Solid Billing Strategy

Cash flow hiccups often arise from delayed payments.

Here’s the low-down on how to avoid this using a billing strategy:

  • Set clear payment terms by mentioning payment due dates on your invoices.
  • Offer discounts or other perks to clients who pay their invoices ahead of the due date.
  • Use billing software that sends invoices automatically and provides reminders for overdue payments.
  • Provide multiple methods of payment, like bank transfers, credit cards, or digital payment platforms, to make it easier for clients.
  • Implement a fee for late payments. This serves as a deterrent while compensating for potential cash flow disruptions.
  • Establish a protocol for following up on overdue invoices. A gentle reminder can often nudge a client to settle their bill.
  • For large projects or orders, ask clients for a deposit or partial payment upfront to reduce risk.

6.   Keep Updating the Cash Flow Statement

An up-to-date cash flow statement provides a snapshot of your business’s financial health and helps you anticipate periods of cash crunch and surplus.

Here’s how to go about it:

  • Set aside dedicated times each month or quarter to update your cash flow statement. Consistency is key to spotting trends and addressing potential issues early.
  • Break down your cash flows into operational, investing, and financing activities to have clarity on where money is coming from and where it’s going.
  • Create projections for the coming months based on historical data to anticipate cash needs and potential shortfalls.
  • Account for all factors that can affect cash flow, from seasonal sales fluctuations to unexpected expenses or changes in client payment behaviors.
  • Cross-reference your cash flow statement with other financial documents, like the balance sheet and income statement, to make proactive decisions and mitigate potential risks.

The Bottom Line

Financial management is the linchpin that can determine the longevity and success of any venture. The process can be daunting, but with the right strategies in place, it’s a hurdle any entrepreneur can overcome.

A winning financial management plan boils down to having good business credit, staying on top of the billing process, breaking tax payments into manageable chunks, keeping the cash flow statement updated, and investing in growth. While these are non-negotiable aspects for any entrepreneur, getting an MBA is optional but can maximize your chances of achieving sustainable business growth in today’s competitive landscape.

Krystal Morrison

I create this blog to share my daily tips about home improvement, children, pets, food, health, and ways to be frugal while maintaining a natural lifestyle. Interested to be a Guest Blogger on my website? Please email me at: [email protected]

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