You want to know something I find most business owners don't always prioritize? Managing their business finances.
And, look, I'm not here to call you out on it if you are guilty of letting your business finances slip through the cracks a little bit. Managing a successful small business can be hard, and we can't always do #allthethings.
Heck, not too long ago, I wasn't staying on top of my money game either.
For some business owners (and yes, this was me too), it's enough to simply mark your income for the month while maaaaybe tracking the cash that comes out for business expenses of any shape or size. You figure, "Hey, as long as I know I have enough cash to pay for my email marketing service next month," then you're probably golden, right?
Not quite. It's not enough to simply know how much cash is coming in or coming out.
To manage your business finances, you need a lot more than just that. So of course, that's what this blog post is all about today.
Read on, my friend, to discover 4 really simple tips to manage business finances and feel more on top of your money game.
Quick economics lesson: Your business might just helping out your local economy, no matter how small! In the Philippines, as of 2018, a whopping 99.5% of businesses were micro-enterprises and SMEs, but these only contributed to 37% of the country's GDP.
But in Australia, for example, things were another story—did you know that small to medium enterprises (SMEs) contribute around 57% of Australia's GDP in 2017? That's way more than in my country!
For a quick nerd-out session, try Googling how SMEs (like you!)are contributing to your own country's GDP. 🤓
5 tips to manage business finances without losing your mind
Manage Your Debt
Many business experts and gurus will tell you that debt management is one of the crucial pillars of managing your business finances effectively. And who am I to disagree?
Earlier this year, I found myself in a $10,000 business debt (or half a million pesos, in my local currency). I'd decided to invest in a coach, even when I didn't have that kind of money on me.
Of course, staying in debt longer than I had to wasn't ideal. So I made a plan to pay it off as quickly as possible. I even challenged myself to pay it off once I got my credit card bill. I didn't want to lose money because of credit card interest!
To manage my business debt, I think I worked harder and smarter than before. I made sure to secure new clients for extra cash flow. I kept a tight (though temporary) belt around my personal expenses. I tapped into some of my savings that I was comfortable enough to allocate to this debt—while making sure I kept at least a month's worth of emergency funds.
And you know what? I paid off that $10,000 just as my credit card bill came a'calling. I almost can't believe it happened, but it did!
Try This At Home Tip
When was the last time you sat down and looked at your total debt? It can be scary to face that big number, but it's crucial if you're going to pay it off as quick as possible.
After seeing your total debt, look at your current cash and spending habits. Where can you cut back, even if just for a little while? How much extra cash can you realistically try to make to pay off as much debt as possible as soon as possible?
Automate Your Bill Payments
Your business probably does, well, business with a ton of different companies and merchants. From must-have business resources like website hosting, email marketing, and automation tools, you probably have a ton of recurring bills to stay on top of.
Keeping track of all these payments is almost impossible for busy business owners to remember. Manual payments take up a load of your time—and that's honestly time you could be using on more-productive tasks for your business.
The simple solution? Automate those bill payments! You can easily manage business finances when you're automating wherever you can. Of course, just make sure that you're keeping your bank accounts with liquid cash flow.
This way, if you're looking to pay off credit card dues, utility bills—or, hey, if you need to send money to the Philippines to pay your freelancers or VAs—you're at least sure that these payments are being made out of sight and out of mind.
But don't forget to review these auto-payments regularly! It's not about forgetting that these dues exist, after all. 😊
Try This At Home Tip
Look into your local banks' online payment processes and see how they might provide an auto-charge feature.
Develop an Annual Budget
I love a good budget. Fun fact: Goodbudget is the name of my budgeting app of choice.
If you're new to the whole budgeting scene, here's a quick one-liner explanation: you just have to give every dollar you have a job.
Of course, the trick to budgeting is making sure you're earning enough to support your budget. You can't set a monthly budget of $5,000 for miscellaneous fees and personal expenses if your income doesn't support that.
As a biz owner, a budget can be the one thing that helps you manage your business finances all year round. But sometimes it's hard to set a budget, especially if you don't make a set income per month. No worries, as a fellow business owner that earns almost a different amount of money every single month, I've got you.
Here's a simple way I set an annual budget for my business, even if my cash flow isn't the same amount month by month.
- Add up all expected business expenses you might have in a year. Check all important places for your biz, including services like software. For purposes of this example, let's say you have a total business expense that is $12,000 annually.
- Divide your total number by 12 to know how much you should be saving in your budget per month. From our make-believe example, that's $1,000/month for your business.
- Add that monthly business budget number to your personal monthly expenses, e.g. rent, utility bills, groceries, travel budget, etc. If you have to, do an expense audit from the previous 3 months to know how much you normally spend regularly. Let's say you have $3,000 of expenses for the rest of your life outside your biz—add that with your $1,000 monthly biz expense, and you need at least $4,000 a month to keep a sustainable lifestyle.
- Are you earning at least $4,000 to keep your life and your business afloat? If you're earning more, great! You can allocate the extras somewhere important. (We're giving every dollar a job, remember?) You might be able to afford that automation software you wanted or even hire a contractor.
- If you're earning less than that, think: where can you cut back, and what do you have to do to make sure you're earning at least $4,000 a month to support your business and life?
Hire A Professional Accountant
Effectively managing your business finances can be overwhelming. It feels like just another task you have to stay on top of, given your already-full plate of other important business must-dos. Talk about wearing multiple hats, eh?
If you can, consider hiring a professional accountant to help you stay on top of things. This might even prove to be a big investment for your business. The more time you save without worrying about cash flow, accounting, and even taxes, the more likely you are to take action steps that actually grow your business.
Of course, you'll want to weigh this option very carefully, especially if you know you're paying off a large sum of debt or if you're not earning nearly enough to support your current lifestyle. But if you're well within the means of outsourcing this task, then you might want to give it a shot!
Okay, the thing about online banking: it's great, it's convenient, it's the greatest thing since sliced cheese.
But the other thing about online banking: it can be really scary.
Sure, maybe not as scary as leaving your entire life's savings in a bag underneath your bed. (Robbers? House burns down? Dog finds that it had a craving for dollah-dollar bills?)
But businesses need to stay on top of their cybersecurity game. Here are a few tips I'd recommend starting with to keep your business secure online:
- Prioritize stringent cybersecurity measures to safeguard your business against cyber-attacks. Use a VPN when accessing sensitive info online and never give information about personal accounts and passwords, even if they seem legit.
- Install malware detection and security software on your computers. If you have employees, make sure this software is also on their computers too.
- Keep backups of your important files. You should know where to access your website backups and backups of the files that live on your computer. Wherever possible, use a secure cloud storage solution that keeps your files online with a digital lock and key.
How will you Manage your business finances?
Let me know in the comments which tip you're planning to implement first! Where's the area you're struggling with most? Be sure to revisit any of the tips above to make sure you get to stay on top of your biz finances—all without losing your mind.