BusinessSoftware Outsourcing

Ultimate Guide on Financial Management for Small Businesses

5 Mins read

When you start a small business, it is the right time to think about how you will grow into a medium-sized company. Not wait until you will get more revenue or employees. And also it is better to think about becoming a big corporation right after you passed previous milestones—one of the main things in the business is financial planning. Together with human capital, vision, added value, business financial management is the core problem you better solve at the very beginning of your journey. In this article, we will look at the small business financial management issues, tools, software, planning, etc. So, together we will handle how to manage a small business finances.

Small business financial management

Financial management of a small business

Cost management for owner

Managing business finance

Loans: finances for small businesses

Be small business finance manager

Pay developer of your business—to yourself

Tracking app and technology

Final Thoughts

Financial Management for Small Businesses
Financial Management for Small Businesses

Small business financial management

Small business begins with the idea and passion. Financial management, budgeting, and taxes, however, are among the least pleasant activities.

“A lack of knowledge of basic finance is a common—and dangerous—mistake. Too many business owners don’t understand their own finances, and have no idea what products or services make the most profit,”

author Richard Weinberger says.

But interests in this stuff are crucial for your business. Due to this, small business owners should understand the fundamental principles of financial management for a small business.

Financial management of a small business

20% of small businesses fail in their first year, 30% of small businesses fail in their second year, and 50% of small businesses fail after five years in business. Finally, 70% of small business owners fail in their 10th year in business. Ineffective business planning is one of the top four reasons why small businesses fail. It is a pity, because for example in the United States, small businesses comprise 99.9% of all the country’s firms. That is why we collect the best points about small business finance management.

Cost management for owner

One of the good tools of financial management of a small business is analyzing businesses’ largest expenses. If one of your biggest expenses is real estate, now, during coronavirus, you can move to a smaller office. A lot of businesses give up their previous offices and are going to create hubs. Their employees can always find a workplace. On the other hand, from now on, most people can work from home.

Managing business finance

The Japanese Kaizen methodology says that you should become as effective as it is possible first. Only after that, you can level up your business. That is why you better do not take more money than you really need. 

Also, the tool of finance management for a small business can be logistic. For example, be like Uber, which can offer thousands of cars, but do not own them. Uber does not need to repair them. The company has benefits without problems. In a for-profit business, keeping an eye on the cash flow, expenses, and revenue is an irreplaceable step in maximizing growth, expanding, and hiring more employees. 

Loans: finances for small businesses

Loans for small business is an important part of business financial management. There are a lot of options that a company can use to boost its growth. Such a tool is relevant not only in the very beginning, but also if you want to expand your services or capabilities. You can choose the kind of loan that fits your business best. Working capital loans best. Among them are a business line of credits, equipment financing, invoice financing, commercial mortgage loans, franchise loans, and merchant cash advances.

Be small business finance manager

Understand where your money goes. Create a balance sheet and watch your business’ month and year incomes and outcomes. Seeing a big picture of the finance management of a small business is key to your success. Do not forget about regular outcomes, which can take a significant part of your money. Start with the assignment of Employer Identification Number (EIN), separate business funds from your personal money, and be diligent in properly setting up payroll. Do not forget to calculate and plan taxes, which can include income taxes, Self-Employment tax, Local Tax, and other taxes.

It will be much easier to control your money and do business and financial management if to have a few separate business documentation. The P&L statement is for summarizing revenue and expenses and reports your resulting profit or loss. The statement of cash flows your revenue and expenses during the period. And the balance sheet summarizes the business’s assets and liabilities at the close of business on the last day of the profit period.

Pay developer of your business—to yourself

A lot of small business owners neglect to pay themselves. They are more likely to pay everyone else, trying to make a business run. But, if the business does not work out, an owner will not have ever paid himself. Also, it is important to save some part of raised money and invest it into growing your business, if there will be a good opportunity. 

Tracking app and technology

It is crucial to calculate all your expenses and incomes. If you miss something out, you can spend more than earn. In that case, you will be out of business before you realize your miscalculation. That is why you also need to always track your business finances. It is reasonable to create a very realistic budget at the very beginning of your business journey. Also, this is a real reason to invest in accounting software. This is a much more manageable expense for small businesses than to hire an accountant. There are a lot of options on the market unless you want something more suitable for your own business. Then keep reading. 

Final Thoughts

Finances for small businesses are not so hard as some people imagine. On the other hand, it will be much easier to get some help at the beginning of your business journey. Besides, you have to deal with numbers, so it is easy to miscalculate something or forget about some payments or taxes. That is why they created a lot of software that could help. The problem is they often are not suitable for your company type or industry-specific. In this situation, you can order your own application that will serve you and your business needs.

The advantages of this idea are:

– you will pay once;

– you will receive your software;

– you can design it as you need;

– you can use it the way you want;

– you can equip your soft with the tools you will really use;

– you will pay only for the stuff you need.

We at KindGeek have reliable and relevant experience in developing FinTech applications, so it will be a pleasure for us to create simple, fast, secure, and practical financial management software for your business. If you are interested, please, check the links below.

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