Many small business owners may admit that finances aren't their strong suit. Entrepreneurs like you tend to be “big picture” people that tackle big problems and develop big visions. “Big picture” people, however, typically don’t like to stare at financial spreadsheets, spending hours entering expenses by hand. Unfortunately, this is necessary to keep a small business going.
At CSI Accounting & Payroll, we've met with thousands of small business owners over several decades. That means we've learned what common concerns and questions are when it comes to handling business finances.
To make your finances a little more tolerable, here are 4 finance tips for small business owners.
1. Don’t Procrastinate on Bookkeeping
One of the biggest mistakes new entrepreneurs make is that they procrastinate on their bookkeeping. Most bookkeeping programs (like QuickBooks) can be extremely difficult to navigate if you don't have a background in bookkeeping, even if you only need to send out a few invoices and track a few expenses.
Putting off your bookkeeping doesn’t make it go away. In fact, since accounting numbers build off of each other over time, it can lead to an overwhelming mess later on. If you can't handle it now, imagine what it will be like in a few months.
Fortunately, though, small business bookkeeping can be pretty simple, especially if you don't have very much financial activity going on yet. It gets easier by breaking everything down into small categories, such as:
- Categorizing Expenses (Including Tracking the Costs of Large Purchases)
- Paying Employees
- Sending Invoices
Everything becomes much more manageable, and procrastination lessens as a result.
2. Understand your Seasonal Cash Flow
Another cautionary tip to new entrepreneurs is to understand seasonal cash flow to know your sales cycles.
If you’re a B2C retailer that sells $20 items, your sales cycle is likely fast enough where having a cash buffer on hand is less of a concern. If you’re a B2B company whose sales cycles last months or years, having extra capital in the bank is definitely a best practice.
Essentially, you should always know how much cash you need to make it another month.
3. Focus on your Core Strengths
As a small business owner, your expertise is in running your business. Similarly, your administrative employees and other staff members have expertise in their areas of work. If any of you try to take on bookkeeping, accounting, or even tax work, you're not going to be very efficient, and you'll also lose focus that should be on your designated role.
It might save you money at the end of the day to handle something in-house, but the cash saved can be small compared to what it costs to take a key employee away from revenue-driving activities.
Read more about how to do your own accounting, and why this might not be ideal.
4. An 80-Hour Work Week is Not Profitable
If you have to work 80 hours a week to keep your business afloat, you’re not profitable. You're also probably not having a very good time. Too many entrepreneurs blow through the earliest stages of their company's growth by putting all their time and energy into their businesses at the expense of their health and relationships. While that may be fine for short periods, it’s simply not sustainable.
If your company is only profitable because you’re working yourself to the bone, your numbers will take a major turn once you scale back your workload - if you haven’t already collapsed from exhaustion first. At some point, you will need help from an accountant.
Get Accounting Off Your Plate
As a small business owner, there are ways to make your finances easier to handle. That's what these tips are for!
However, after a while, it may become detrimental to your business to continue doing your own bookkeeping. You can find many advantages in upgrading to monthly accounting and receiving monthly financial statements, unlimited one-off advice, year-round tax strategy, and more.
If you're interested in monthly accounting, why not check out CSI Accounting & Payroll? We've specialized in small business monthly accounting for over 50 years - which is much longer than most business accountants. To see if we can be a good fit for your business, click the button below for your free consultation:
Not ready to talk? That's okay! First, click the image below to learn more about how a monthly accountant can offer expert advice based on timely data:
