As a business owner, it is key that you understand the financials in your business and what they say about your business. But so many business owners really don't have a clue. I'm sorry if that sounds mean but it's true.
There is more to running a business than making deposits and paying expenses. You have to understand where your money is coming from and where it is going. You have to know how to look at a report and see that financial troubles are on the horizon. You have to be able to identify areas, products or services in your business that are cancerous to your business.
So to help you out I am going to share 5 financial business tips that all business owners should know.
1. Track all disbursements.
I am a big advocate for using a software solution to maintain the tracking of your business finances. It is a necessary tool to understanding where your money is being spent in your business. Once you know where your money is going you will be able to make changes that can ultimately increase your cash flow.
2. Stop co-mingling.
I have said it before and I will say it again STOP CO-MINGLING YOUR PERSONAL EXPENSES WITH YOUR BUSINESS EXPENSES! I'm sorry for yelling but I am so passionate about this. Now don't get me wrong as a business owner I understand how hard it is to do this. I get that it's easier to just swipe your business debit card than it is to write yourself a check and deposit it into a personal bank account. Using your business account as a personal bank account is the #1 thing that will cause you to experience financial failure in your business.
3. Pay your taxes.
Look - no one wants to pay taxes but the fact of the matter is that we have to. So make sure that you have your accountant, CPA, EA, or tax preparer perform tax planning in your business minimally twice a year - in June and in November. The reason for this is so that you know whether your business is tracking to make a profit and the tax implications on that profit. AND so you are not surprised in April when your balance due is four figures or more.
4. Avoid impulse purchases.
In order to grow your business, you will have to make some major purchases at some point in time. So plan and prepare for it, and avoid impulse shopping. Take the time to budget for items so you will know your expected spend, and then plan what sales need to occur and the time frame for when you will be able to make these purchases. If you want to take advantage of peak sales times like tax season, back to school or Black Friday, then plan your purchase for that time of the year.
5. Create budgets.
Speaking of planning and preparing - create budgets. Yes that I said budgets - plural. Creating and maintaining budgets is key to managing your cash flow. you have to know where you expects your sales to come from and where you plan for it to go. And the reason it is plural is because I'm not just talking about your annual budget; you should also create budgets for major product or service launches and definitely for events. You don't plan a vacation without knowing what you plan on spending, so why would you plan a major event in your business? Not creating a budget puts you in a position to overspend which will take more money out of your business and not the other way around.
What additional financial tips do you suggest for business owners?
Interested in learning more financial business tips for your business? Contact Sherrell for a business assessment session at info@empower2thrive.com.
Sherrell Martin is the Founder and CEO of Empower 2 Thrive, LLC, a boutique practice offering financial management accounting and business success strategies. She strives to empower business owners and entrepreneurs to thrive financially in life and business by gaining financial control and creating wealth and legacy. She helps business owners and entrepreneurs who struggle with business and financial organization establish systems that will allow them to create, build and maintain a financially thriving business using accounting, finance and business strategy. To receive your free copy of her Start-Up Success Guide - The 10 Critical Steps to Building a Thriving Business from the Start and a FREE subscription to her Empowering You bi-weekly e-zine, send your request to info@Empower2Thrive.com.
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