By | Sheryl Wright
Here’s a sobering fact: 80% of new businesses fail in their first year. Sometimes this is due to the lack of market for their products or services. A majority of the time it’s related to the lack of capital or poor financial maintenance.
This is sad because many endeavors have the chance to be something more with better control of money. Thus, you want to reign in your issues to get past the first year of operations. Here are 5 tips for managing your small business finances.
1. Set Up ACH Accounts
An Automatic Clearing House (ACH) is a means to ensure your customers pay on time. In doing so, your business has the funds to pay your vendors and maintain overall productivity. Without an ACH, you rely on promises that your customers will pay on the due date.
ACH Payments are simple to set up. Companies like Transcend Pay provide tools customers use to register their financial information. Subscription payments are automatically removed upon the due date. Though a small percentage aren’t made due to lack of funds, the lack of payments is far less than without an ACH system.
2. Invest In Growth
There’s an urge to purchase the latest software or machine when your business starts making money. However, do these items have the proper return on investment (ROI) for what you pay? In other words, do they help increase the company’s revenue or are they simply nice to use?
To manage your small business finances you must invest in growth instead of shiny things. If an application helps increase your productivity, then it’s a good idea to add it to your suite of tools. Always do this for each major purchase you want to make.
3. Hire An Accountant
You don’t have to bring on a full-time accountant to help manage your organization’s finances. After all, you probably don’t have the funds available. Nevertheless, you want to hire one in a consultant capacity to help.
The accountant’s job is to review your balance sheet and give you an honest answer on where you stand. They’ll recommend reductions in debt or expenses to cut to improve your revenue stream. Bringing these individuals in once or twice a month should keep your finances stable.
4. Maintain Good Credit
Credit is the albatross of the small business world. When it’s good you have the power to get low-interest loans or better payment agreements. When you put the albatross of bad credit around your neck, then you become a pariah. Financial institutions don’t want to deal with you.
This is why you need to maintain good credit. Even a missed or late payment causes your credit report to be flagged. Pay before or when an invoice is due. If possible, take care of the entire balance in one shot to avoid excessive interest payments.
5. Plan Ahead
You’re proactive when it comes to the development of upcoming products and services. So, why aren’t you proactive when it comes to your finances? You know about upcoming bills, so why do you panic a few days before they’re due?
Don’t keep going this route with your money. All it does is lead you to false beliefs on lack and doubt. If you know a payment is due in two weeks, then ensure the money is available 14 days before. Plus, don’t use the allocated funds for anything else.
The same goes for big expenditures. You must know the value well ahead of time for the product or program you want to purchase. This way, you have the power to allocate the money in smaller amounts. Then, when it’s time to purchase the item, the money is available instead of being scraped together at the last minute.
These 5 tips are a small number of items to consider for managing your small business finances. Overall, you need to keep a cool head no matter the situation. Panic and anxiety due to lack of funds don’t help you. A clear head is needed to come up with a solution to your monetary issues.
Don’t be afraid to ask for help. Hence, the reason you want to maintain good credit. It allows you to take out loans to get through the toughest parts of the business.