There’s no single word that can accurately capture everything one feels when starting a new business. You’re going to feel so many emotions within a short span of time — exhilaration, relief, fear, dread. Excitement over the possibilities the future holds. A sense of relief now that you’ve finally entered the world of business. Afraid that you’re going to buckle under the pressure. And dread as you realize that there’s a lot of work left to be done.
If there’s one thing that most entrepreneurs are afraid of, it’s managing their finances. Of course, we all know that good financial management is an essential component of any business, from startups to billion-dollar conglomerates. But it takes more than keeping receipts and balancing your checkbook to manage your finances. It’s all about thinking ahead and preparing for both the good times and bad.
Thankfully, there are many tools that help business owners effectively manage their finances. Whether you’re wondering how to make growth forecasts or pay independent contractors online, there’s something for everyone. But it’s also important to revisit the fundamentals to ensure success down the line. Here are a few financial tips that will help you grow your business.
1. Don’t forget to compensate yourself
Many small business owners fall into the trap of reinvesting everything they earn back into the business. Every dollar can go a long way in sustaining day-to-day operations, especially in the early years. However, you need to separate yourself from the business when it comes to finances.
Think of yourself as another employee you need to pay. You still have personal bills and a mortgage to pay, and many of us start a business to give our personal finances a boost. You’re doing yourself no favors if you’re going broke trying to keep your business afloat.
Compensating yourself is also a form of insurance. Many entrepreneurs think that their business comes first, but if it fails, you’re going to be left with nothing. Treat the business as a separate entity and give yourself a regular salary.
2. Focus on growth
Once you’ve stabilized your finances, you need to set your sights on opportunities for growth. In the world of business, you can only go up or down, and I don’t need to point out which direction you want to be headed in. The goal of every small business is to become viable financially, and that starts by investing in growth.
A commitment to the future shows your customers and employees that you want to grow and innovate. If your customers think that they can have a long-term relationship with your business, they will feel more confident about signing deals and contracts. Your employees will always stay with you if they can see a future in the business.
3. Learn how to deal with clients
Just as we all know someone who hasn’t paid their debts, every entrepreneur has dealt with a customer who is always behind on their invoices. Cash flow is important to the health of a small business, and if you’re having difficulty collecting from certain clients, you might find it difficult to finance day-to-day operations. Start by offering alternative methods for delinquent clients to settle their bills.
Instead of repeatedly calling or sending emails to a late-paying client, consider adopting a different strategy. For instance, you can offer a small discount if they pay within a week after receiving the invoice. Conversely, a late payment fee or penalty can also work, but it’s riskier. Experiment with different approaches and see what sticks.
4. Review your books every day
One common mistake many entrepreneurs make is putting off reviewing their books until it’s too late. You need to make it a point to check your books every single day, even if you’ve hired someone else to manage your finances. Your business decisions have to be supported by data, and you can’t do that if you don’t know where your business stands financially.
The bottom line
Taking a proactive approach when it comes to financial management can give you a clear picture of your company’s growth prospects and trajectory. If you have access to the right data, you can make decisions that will influence the future of your business.
Focus on strategies that balance good management with long-term growth. Short-term growth at the expense of customer or employee satisfaction is shortsighted and can affect your company’s prospects.