Do you end certain days on the job with a head scratch and something along the lines of, “I really need to manage my money better?” If so, we want to chat with you before that molehill morphs into Mount Vesuvius.
Learning how to manage money tends to feel a tad overwhelming, but that’s not because it’s difficult. It’s more because it’s tedious. Managing a small business is a major blessing. It allows you to saturate yourself in a chosen field that appeals to you and be your own boss. So, let’s roll up our sleeves, pull out our calculators, and take small business financial management by the horns.
1. Separate Your Accounts
First things first. Don’t try to manage your business finances in your personal checking account. Be sure to create a fresh, new account for your business that’s entirely separate from your personal funds. You’ll be saving yourself a major tax headache at the start of every year.
It becomes increasingly difficult to track your business expenses when they co-mingle with your trips to the mall or the grocery store. You also want to maintain accurate records of any loan repayments you’re making or any special financing you’re tackling.
2. Pay Yourself First
Separating your accounts will also allow you to pay yourself first. This sounds greedy or counter-intuitive, but it’s actually very important to do this. As your business starts to grow and you find new ways to improve, those things are going to excite you and cost you money.
So, if you forget to pay yourself first, then you’ll start to fall short on personal expenses and maybe even think your business isn’t working (even though it’s actually quite profitable).
Start with 10% of your earnings. This is a modest amount that will hopefully allow you to self-sustain and test the profitability of your new venture. If you can save any amount that you pay yourself, then you’ll also be forming a nice safety net for unexpected expenses.
3. Manage Your Money Daily
Another all-encompassing point is to look at your money on a daily basis. Never just “close up shop” for the day without examining your bottom line. Whether you hire a bookkeeper or invest in smart software, be sure to maintain accurate records of your income and costs.
Annotate every expense you make so you can see exactly where your money goes. This will help you become wiser with each passing month. You also want to send out invoices immediately. Don’t wait to collect your money for goods or services and be sure to set strict payment terms.
Has anyone ever asked you what is MRR? It’s a monthly recurring revenue calculator. When you standardize your recurring revenue, you’ll have a built-in platform to assess your money on a daily basis. Then, you can sit back and watch as your revenue growth takes off.
4. Negotiate With Vendors
Now that you’re a business owner, don’t be afraid to negotiate. Depending on the project, you probably won’t be locked into only one vendor to provide the service you need. If you need construction work done or a sign built for your store, there are going to be plenty of fish in the sea.
Always remember that this is your business, your baby, and you can shop around until you find a price that’s right. Dig into each company’s purchase terms, too, like late payment penalties or interest-free periods of time. Scour the internet for each company’s reviews. The point is, stand up for your business and never be afraid to negotiate.
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5. Pay Your Bills On Time
Speaking of late payment penalties, let’s discuss the importance of paying your bills on time. If you’re just starting out then your profit-loss margins are going to be quite thin. This is when all your money’s on the line.
It will do you no good to incur late fees on payments that you’re going to have to make anyway. Be diligent about loan repayments, credit card repayments, vendor payments, and utility payments.
The more your bills pile up, the more your debt and financial burdens pile up. If you can’t pay your bills on time, then it’s time to see where costs can be cut in order to prevent the mountain from growing.
6. Be Frugal
Have you ever witnessed a multi-millionaire haggle over the price of something seemingly insignificant? Maybe you wondered why they were trying to negotiate something that would only save them a couple of hundred bucks. That’s a drop in the bucket for them, isn’t it?
Wrong! If you see a head honcho who’s very frugal, then you’re witnessing a smart man or woman. This is the reverse of those accumulating late payments. Late payments may seem like small amounts of money, but that’s a small amount of money that’s going out, not in.
The more you can make small amounts of money come in, the more you’re going to increase one fund or another. Maybe that’s the small savings fund for yourself or the small savings fund for holiday parties. Whatever it is, develop a mindset of frugality and carry it with you even when you hit Bloomberg’s or Trump’s status.
7. Plan for the Future
Knowing how to manage your money today should include how you’ll manage your money tomorrow. If you know you’ll need to build a kitchen in your space someday, then start saving today. Don’t rely on another loan.
If you have dreams of opening up another franchise in five years, then plan for that as though it’s starting to happen today (because it is). If you’re not planning ahead, then you’re going to fall behind the competition. Planning for the future also means allocating funds for a small retirement fund. Remember, pay yourself first!
I’m Going to Learn to Manage My Money Today
Look in the mirror and tell yourself, “I’m going to manage my money better, starting today.” That’s all that’s required. Whether you’re just starting out or are several years into the game, there are always new ways to learn how to manage a small business.
A lot of it comes down to strict attention to detail. That’s certainly something you can teach yourself. Review your books every night. See where you’re spending too much; see where you’re saving wisely. Understand when that surge in revenue is going to hit.
One thing your business is never going to regret is launching your own blog. It’s a simple way to demonstrate expertise in your chosen area and share product and service updates.
As you expand your horizons, your friends here at On Blast Blog can help you build a profitable blog. Whether you attach it to your small business or run a separate blog for added cash, we’ll help you design a beautiful platform that serves you well. Keep coming back for more step-by-step guides!