Small businesses are the heartbeat of America, representative of the grit, determination, and creativity of those driven to do more. While every business must have a unique offer, novel concept, or differentiator to stand out, they all need financial management. Without a financial strategy, even the most promising enterprise is at risk of failing, even irreparably damaging founders’ reputations. However, there are several actionable tips small businesses can explore to establish a strong financial foundation for their future success.
Table of Contents
1. Leverage Small Business Software Partners
Small business owners are oftentimes generalists of business management tactics, while their original passion aligns with their product or service. But when you’re small, every dollar counts and you can’t always hire an expert to handle specialized tasks.
Thankfully, modern software has made it easy for entrepreneurs to expand their comfort zones. For example, you can tap into web design with a small business website package, leveraging search engine optimization and copywriting best practices. Make edits yourself, after the primary design is done to maintain control and adaptability as your business grows.
2. Create a Budget
A business budget may be even more important than a personal budget, especially when your clients and employees rely on you. Establish a budget that outlines your cash reserves, access to credit, and obligations, like rent, software, payroll, and utilities. Next, review your expected income, including when you expect to be paid and how it’ll be allocated once received.
Create a schedule that shows your anticipated income, expenses, and reserves. Identify how much of a reserve you should have to cover your baseline obligations. Consider potential risks to your business beyond customer non-payment, like natural disasters, financial crises, or cybersecurity attacks. Review resiliency resources to prepare your budget and your team for the unexpected.
3. Establish Financial Controls
Whether you’re a solo-preneur or have a growing team, create a set of checks and balances for your finances. Establish segregation of duties for your team to reduce risk and opportunities for fraud. Split responsibilities for invoicing, requiring one individual to request checks and another to sign them. Utilize invoicing software that can help automate reminders and send invoices. These extra steps can help prevent internal fraud and business ruin.
Create an internal audit plan to review key transaction types, confirm compliance with processes, and stop issues before they worsen. While you want to think the best of your team and their intentions, creating rules and boundaries will protect everyone.
4. Plan for Taxes
Align your invoicing process in compliance with local, state, and federal tax law before you issue the first one. Create a plan for reserving the money collected for taxes, using your financial controls process throughout. Separate tax savings and audit it monthly to ensure you’re in alignment with your obligations.
Set up electronic access for paying quarterly tax payments and monitor your payments in comparison to your future expected obligation. Engage in free training from your local chamber of commerce and small business administration regarding taxes and financial management, if needed. They often have specialists who serve as small business coaches, free of charge, and aim to support your efforts. They can also help keep you updated on new tax laws, business credits, and programs that can improve your business.
5. Vary Clients and Payment Terms
Most are familiar with the warning of “don’t put all your eggs in one basket,” but the advice is timeless. Placing your company’s health in the proverbial hands of one major client or within a single industry is dangerous. If your big education client suddenly tightens its budget, your marketing firm will feel the pinch. Strive to vary your client types across industries unrelated to one another to distribute risk.
Similarly, aim to structure your contract types and payment terms to keep a consistent stream of business and income flowing. Ink retainers for regular clients whose budgets allow and sprinkle in ad-hoc and annual commitments elsewhere. Distribute task-heavy work alongside strategic work, which helps manage the hours demands on your team. Assign payment expectations aligned with work type, client, and dollar amount and accept various payment types, including card payments.
6. Leverage Financial Opportunities Reserved for Small Businesses
Small businesses can often access grants, low-interest loans, and tax credits from local and federal government agencies. Communities often stove to attract entrepreneurs with enticing offers for lower costs of doing business in exchange for setting up shop. Consider your ability to relocate, adjust, or flex with these types of offers, especially if you don’t have deep roots.
Some opportunities will surprise you, even transforming your initial business plan into something even better. Your art consultancy may have originally sought to collaborate with major developers, but a local incentive opened your eyes; Government-owned parks and recreation facilities need your help to create attractive and lasting public art. Look through government contract sites to mine for opportunities, including those specifying women, minority, veteran, and disabled-owned enterprises. If you qualify for those designations, complete the requirements to become certified to increase opportunities for lending and contracts.
Manage Your Business Finances and Take On the World
When your business’s finances are well-managed, you can focus on executing your vision. Collaborate with partners to create a financial plan and business structure that elevates your brand. Establish financial controls to protect your interests and partner with clients amenable to terms that allow you to deliver results. When you manage your finances, you can make a positive impact in your community, industry, and even the world.