How to Smartly Manage Small Business Finances
Do you know any small business owner who is not busy? All week long we manage projects, support clients, find new business, manage the marketing while hardly ever finding enough time to catch up on our business finances.
It’s not that finance admin is that much of a chore, it is simply more tedious and inefficient at times as we have to sit down in front of our laptops, in an office to sort expenses and paper receipts, add up client time, send invoices or sort stuff to send to the accountant. And we usually end up doing all of this in the evening or on weekends.
After running my own business for three years years and trying various methods of keeping on top of everything, here are my top 5 easy tips for financial productivity.
Automate. Automate. Automate.
With all the small business apps out there, it’s easy to automate a lot of the financial tasks. Find one that suits your practical needs and get diligent with it. If you need to track client time, expenses and invoice clients, find an app or software that will do just that. Do you want to manage your finances end to end without an accountant? Then pick one of the cloud accounting solutions.
Consider your needs carefully however – if the solution is too big or too overwhelming, you will end up not using it. Or if you are always on the road, look for a mobile app solution.
Change Small Habits
Don’t try to completely overhaul your whole business routine in one day. Pick a category and focus on small improvements. For example: for receipts and expenses, always take a picture at purchase or put them in a special folder. Better yet, use your mobile phone to process it on the spot. Track your project time carefully, as 10-15 minutes lost here and there by the end of the year can add up to more than 10 hours worth of lost revenue. Or as soon as you finish a project, make a habit of invoicing the client. Not only will you tick one more task off your list, but you will also get a satisfying sense of accomplishment that will keep you moving forward.
Track Your Costs
We all end up with tons of receipts on our wallets and inboxes. And if you’re like me you mix cash, business card and personal cards on various business expenses. It took me 6 months in the beginning to reimburse myself for business costs that I had charged to my personal card for various reasons. Nowadays I use intelligent scanning software for all of my receipts, I quickly upload any digital receipts and every two weeks I do an expense report to reimburse myself for money owed to me from the business. And if I don’t have any time, I simply take a picture of the receipt with my phone on the spot to deal with it later.
Know Your Cash Flow
I like to manage small finance tasks during a coffee break or while in a taxi. Because I track my project time in an app, I can invoice a client in less than two minutes, and I can email it directly from my phone. Leaving invoices for the end of the month makes for an unhealthy cash flow as it amounts basically to free financing for your client for at least one month. Can you think of any business that would give you an interest free loan for a month or more? Also, sending reminders as soon as the invoices will drastically increase your payment rate. And while the revenue line is important, do have a look at your spend to ensure a healthy cash flow balance.
Review. Review. Review
Block 10 minutes in your calendar every two weeks or every month to have a quick look at your key business indicators. If your software gives you reports or graphs, have a good look at your monthly revenue and costs, as well as the biggest spending categories. Check all overdue invoices and quickly follow up. Check for any tax due (sales, VAT etc.) and put up to 30% aside in your bank account for quarterly or year-end taxes. Check which clients are the most profitable and least profitable. This will enable you to make some easy and valuable decisions, which will keep your business profitable.