This article is only for educational purposes and does not constitute legal, financial, or tax advice. Make sure you consult a professional regarding your business needs.
Staying on top of your business finances is an important aspect of maintaining positive cash flow and financial stability. If you’re lost when it comes to proper accounting and business funds or resource management, you might find yourself unable to invest in or grow your business.
Keep your business running smoothly while also planning for your future with these tips for managing your business finances.
Prioritize business financial planning
Don’t hold off on analyzing accounting reports and financial statements to gain insight into your business’s performance. Staying on top of accounting and bookkeeping will allow you to set the right financial goals, whether that’s to invest more money in your business (for expansion, staff, or new inventory) or save for retirement.
Preparing ahead of time is also the best way to avoid tax season stress. Avoid common tax mistakes with organized records and bookkeeping. In addition to understanding tax deductions (many of the expenses you incur in the course of running a business are tax deductible), learn how you can lower your tax burden as a small business owner. For tax advice on your unique business needs, consult a reputable accountant.
Manage cash flow
Ensuring the financial health of your business requires managing your cash flow efficiently.
Take a close look at all of your business expenses (direct and indirect) and overhead costs (fixed, variable, and semi-variable) to calculate your overhead rate, and monitor it on a regular basis. Review your business reports, and assess your core business and financial operations in relation to your sales and operating margins.
Once you have a handle on costs and margins, you can leverage a variety of financial services and tools to manage your business funds and cash flow with business banking. Evaluate your purchase, liability, credit, and interest needs when considering using a business debit or credit card.
Obtaining financing is another tool to help your business grow. A business line of credit or business credit card can be a good option for short-term financing. For funding larger projects or business needs — like a renovation, equipment, or new marketing campaign — a business loan might be the way to go.
Optimize your payroll process
Making payroll can be a challenge for many small businesses, even if they’re bringing in enough revenue. By optimizing your payroll process, you can improve your cash flow, making it easier to pay employees each payday.
The first step is to choose payroll software with direct deposit, which transfers your team’s pay directly to their bank accounts. With paper checks, your money is put into a holding pattern, since employees will deposit their checks at different times. While it may seem like a minor detail, direct deposit can help you better control your cash flow.
You also want to select a pay schedule that follows all state guidelines, and gives you and your team the most financial autonomy. An ideal pay schedule coincides with when you have cash coming in and allows you to pay your team as frequent as possible. When employees can get paid soon after they earn it, whether it’s weekly or instantly, they can make more informed financial decisions.
Improve inventory accuracy
Inventory accuracy is essential during uncertain times. Some types of businesses are overwhelmed with excess inventory, while others are trying to keep up with a surge in customer demand. Both situations can lead to lower sales, a poor customer experience, and financial instability if businesses don’t know what they have in stock.
As many businesses go omnichannel to reach more customers, financial inefficiencies can arise if inventory isn’t being properly tracked across multiple channels. For instance, if a customer doesn’t know that an item they wanted in store can also be purchased online, a sale is lost, one that could’ve helped a business move inventory that might soon be out of season.
Stay one step ahead of your inventory levels by using inventory management software that automatically connects your in-store and online catalogs.
Mitigate supply chain risks
Supply chain disruptions and volatility have impacted retail, restaurants, and healthcare. Closely monitoring demand and working with suppliers to ensure availability can help business owners mitigate risks to product access, and ensure your customer experience continues to be reliable and positive.
Adjust supply chain strategies, track existing contracts and orders, and have backup suppliers to prevent disruptions from eating into your projected sales and forecasted revenue. To plan for the future, take a look at your overall business and supply chain plans and consider proactively tracking additional costs related to your business continuity activities.
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