Small Business Tips

January 21, 2022
Small Business Management

Any small business owner can find it difficult to keep track of their money. Your small business’s success is often down to the abilities you bring to the table when it comes to creating a product or providing a service.

It can feel like a chore if you don’t have a lot of experience managing business finances, and you may be slipping into unhealthy financial habits that could affect your firm in the future.

Two aspects to ensure your firm is financially healthy are education and organization.

  • Your firm will be more stable and less likely to fail if your funds are properly managed.
  • Pay yourself, maintain good credit, keep track of your records, and plan ahead to keep your company’s finances in order.
  • Small business debt funding entails both interest and repayments, whereas equity investment does not include interest but may provide you less control over your company’s operations.
  • The purpose of this article is to provide business owners with information on how to effectively manage their company’s finances.

The importance of financial management in a business

For each business owner, the most critical step is to educate yourself. Business owners can create a stable financial future and avoid failure by mastering the essential skills required to run a small business, such as simple accounting duties, asking for a loan, and producing financial statements.

Staying organized, in addition to education, is an important part of good money management.

Tips for managing small business finances

Pay yourself

It’s easy to attempt to put everything into day-to-day operations when you’re running a small firm. After all, a little additional cash can go a long way toward helping your company expand.

Small business owners, according to Alexander Lowry, a professor and director of Gordon College’s master of science in financial analysis program, should not forget their personal position in the company and should be compensated accordingly. You want to make sure that your personal and corporate finances are in order.

Invest in growth

It’s crucial to set aside money and look into prospects for advancement in addition to paying yourself. This can help your company grow and prosper in a financially sound manner. Tobias Financial Advisors’ chief financial officer, Edgar Collado, believes that business owners should always keep an eye on the future.

The willingness to invest in the future should be demonstrated by a small business that wants to continue to develop, innovate, and attract the best personnel, he added. As a result, “customers will appreciate the higher level of service, employees will appreciate that you are investing in them, and you will ultimately create more value for your firm than if you spent all of your revenues on personal problems.”

Don’t be afraid of loans

It’s not uncommon for people to be terrified of taking out a loan. They can cause you to be concerned about the financial consequences of failure.

You may, however, face significant difficulties when trying to purchase equipment or expand your staff without the funds you get through loans. You can also use the funds from the loan to improve your cash flow, allowing you to pay your staff and suppliers on time.

Have a good billing strategy

Every business owner has a client who is always late with their payments and bills. Managing small business finances also entails ensuring that your company’s cash flow is enough on a daily basis.

If you’re having trouble collecting money from certain consumers or clients, it’s time to think about how you bill them.

Invoice Factoring Guide’s managing editor, James Stefurak, said, “Too much cash caught up in unpaid bills can lead to cash flow problems, which is a leading cause of business failure.” “Try a different strategy if you have a regular late-paying customer, which we all do, rather than pestering them with frequent invoicing and phone calls.

Keep track of your financial records

This is a simple, but extremely significant, exercise. Even if you’re working with a bookkeeper, try to set aside time each day or month to check and monitor your records. It will not only provide you a better understanding of your company’s finances, but it will also give you a glimpse into potential financial wrongdoing.

Establish good money-management habits

Even if it’s as easy as setting aside a defined amount of time each week to examine and update financial data, establishing internal financial protocols can help your company’s financial health. You can reduce the danger of fraud or risk by keeping track of your finances.

“We’re typically short on time, money, and technology resources as a small firm, but it shouldn’t stop any small business owner from implementing some form of internal control,” Collado said.

“This is especially crucial if you have workers, as a lack of internal controls can lead to employee theft or fraud, as well as legal issues if you or an employee violates certain laws.”

Make a list of things to do before you go

There will always be company difficulties that need to be addressed today, but you need to plan for the future when it comes to your finances. “You’re behind the competition if you don’t think five to ten years ahead.”

Financing options for businesses

It’s crucial to keep in mind that business finances aren’t only about how much money you make, but also how you spend it and where you acquire it. You should be aware of the two primary types of funding when it comes to where you acquire your money:

Debt funding

A debt funding loan is a loan that your firm pays back at a higher rate of interest. You can instantly access funds that you might not be able to receive for weeks or even months if you use debt finance.

Debt finance includes bank loans, government loans, merchant cash advances, business credit lines, and business credit cards, all of which must be repaid even if your firm fails.

Equity funding

Unlike debt financing, equity finance does not need repayment if your company fails. You’ll almost certainly have to give your donors a place at the table if you want them to make decisions.

Equity funding can come from a variety of business sources, including venture capitalists, angel investors, and equity crowdfunding.


Small business management involves a lot of moving parts, whether it’s just you and your cofounder running a startup out of your garage or you’ve got an established small business workforce.

You can, however, do a lot of minor things to help your company grow, attract more clients, and run more smoothly.

The good news is that there is no such thing as a “wrong” method or style; all you have to do is figure out what works for you and your company, and these small business management notes can help you achieve that.