7 Financial Planning Tips for Small Business Owners

Financial planning tips for small business owners refer to the effective money management in a business environment. A financial plan is a comprehensive picture of your current finances, your financial goals and any strategies you’ve set to achieve those goals. Good financial planning tips for small business should include details about your cash flow, savings, debt, investments, insurance and any other elements of the business financial life span.

Although, the hard work of building a business isn’t always as glamorous as it sounds. Small business owners are faced with a number of tough financial managements and decisions in the early stages of growing a business, especially when it comes to finding funding and building a sustainable business model. Without reliable revenue streams to fund the business, small business owners are often forced to get creative and use money management to support business until it is able to stand on its own.

Looking for ways to running a small business easy? Consider these researched financial planning tips for small business owners. The money management tips will guide you to launching a new business.

Financial Planning Tips for Small Business Owners

Financial planning is an ongoing process that will reduce your stress about money, support your current needs and help you build a nest egg for your long-term goals, like retirement. Financial planning is important because it allows you to make the most of your assets, and helps ensure you meet your future goals.

A good financial planning is guided by your financial goals. If you approach your financial planning from the standpoint of goals, you may be getting your business managements right.

Financial planning isn’t just for large business entrepreneurs; everyone can create a roadmap for financial future for his or her business. You can adopt your financial planning strategy yourself, or you can get help from a financial planning professional. Here are the financial planning tips for small business owners provided by financial planning professional:

1. Get your budget right

Getting your budget right is one of the powerful financial planning tips for small business owners. Most people need some way of seeing where their money is going each month. Getting your budget right can help you feel more in control of your finances and make it easier to save money for your goals. The trick is to figure out a way to track your finances that works for you. Once you know how much money you have coming in, the next step is to figure out where it’s going. Tracking and categorizing your expenses can help you determine what you are spending the most money on and where it might be easiest to save.

Part of having a realistic business plan is having a budget. Admittedly for a lot of people, the word ‘budget’ alone is enough to get the eyes rolling and the snores coming on. Budgets are not exactly exciting or fun to the majority of people that’s why it’s a good idea to have a numbers person on hand.

There are a lot of other parts of running your small business that will be fun; when it comes to budgeting though, don’t ignore it, get yourself a measurable and realistic budget, and map out your projected cash flow. These will create the foundation for your business goals.

2. Don’t act above your budget

Have you ever started off the month with the best of intentions to cut expenses to only what you need, steering clear of the sales displays, and trying to watch your spending? And then, despite your best efforts, it just seems to happen. Before you know it, you’ve spent more money than you wanted to. Don’t beat yourself up; it happens to majority of new business.

As a matter of necessity, creating a budget, and sticking to it is a good approach to financial management. Your budget cannot be considered ‘realistic’ if you don’t or can’t live within its parameters.

Read Also: The Various Ways of Raising Capital for Business Start-up

3. Conduct a cash flow

A cash flow analysis determines a business working capital the amount of money available to run business operations and complete transactions. That is calculated as current assets (cash or near-cash assets, like notes receivable) minus current liabilities (liabilities due during the upcoming accounting period).

Conducting a cash flow analysis allows you to put your cash flow statement under a microscope to see the movement of money into and out of your business. A cash flow analysis illustrates whether your business earns enough income to cover financial obligations, and if you’ve got money left over after the bills are paid.

Lack of cash is among the primary reasons businesses failed. You need to stay on top of your cash inflows and outflows. The best way to do this is to create a cash flow statement to analyze your financial health, and update it at least monthly.

4. Separate your business finances

As you navigate business financing, it may be tempting to use your personal finances to help out when your business needs a boost, but that is not always the best solution in the long run. Separating your personal and business finances can help ensure you treat your business like the independent entity it is, while safeguarding your personal finances.

Don’t wait until you’re generating revenue to create a separate bank account for your business. Mixing personal and business spending makes it difficult to see how much money your business actually has.

Create a business checking account and use it for all business expenses, large and small. By creating a dedicated space for company money, you will make it easier to manage cash flow and keep an eye on your company’s financial health.

Though there are many benefits to keeping your personal and business finances separate, two of the main reasons you should draw a line in the sands of finance are for tax and personal protection purposes.

  • Taxes: It is much easier to keep track of business expenses for tax purposes if you use a separate business account. Once you have your business checking account, keeping track of things like expenses is essential to properly filing taxes. Remember, from office expenditures to operational and inventory purchases, every receipt counts. When it comes time to file your taxes (or hand everything over to your accountant), a thorough collection of business-only information is going to save you a lot of time and a significant amount of stress.
  • Personal Liability: Separating your personal and business finances is important for tax reasons, but perhaps equally, if not more; important is separating your personal finances for the sake of your personal security. Using your personal finances to back any entrepreneurial venture can be risky business and not just because of the initial financial gamble.
5. Minimize your expenses

In an uncertain economy, when every penny counts, even the smallest increase in revenue or cost cutting can impact company profitability. The good news is a large-scale company overhaul isn’t necessary. It’s often simple, common sense steps within a cost-reduction strategy that improve the bottom line, especially for small businesses.

You can do some cost cutting on office supplies by shopping around to compare prices. Look outside your pool of traditional vendors. You can find affordable office supplies with large discount suppliers.

Before you commit to large business expenses, make sure you have the revenue and/or funding to support those costs. One way to stay lean and nimble as an organization is to avoid expenses that bring large, fixed costs to your business.

This includes expenses such as office space, office equipment, and even new hires. When you add fixed costs, you increase the minimum amount of revenue required just to break even. Consider the cost savings of using co-working spaces or continuing to run the business out of your basement. Hold off on full-time hires and opt for contract workers until you’re in a more stable financial place.

6. Choose low interest loan

Before starting the loan search process, you should calculate how much money you are going to need. Make sure to factor in potential fees and account for having to pay interest when calculating the payments you will be able to afford.

For borrowers looking for a low interest loan, the interest rates a lender offers is likely the most important consideration. The lowest rate a company advertises is never guaranteed and depends on the terms of your loan as well as your credit health. Also make sure to incorporate any fees the lender charges into the interest rate. Fees can significantly impact the overall cost of your loan.

Small business loans vary in terms of interest rates and repayment terms offered. Look for a loan that offers a low interest rate and a repayment timeline that fits your business plans.

Additional financial support could come from investors and other private sources of funds. Do your investors have skills that can support your business? If not, you might be better off seeking money from lenders who have additional resources to offer.

Strong money management tips and financing skills will help any small business owner navigate the early fiscal challenges of starting a business.

In order to know what loan terms and rates you qualify for, you need to know your credit score. Your credit score is particularly important when searching for a low interest loan. The better your credit score, the better chance you have of finding a loan with a low rate. If you struggle with credit, you may want to consider signing up with a cosigner to improve your chances of getting a low interest rate.

7. Set Short Term Financial Goals

Setting some attainable, short-term financial goals is a great way to stay motivated in running business as you alter your spending habits. Having these goals will constantly remind you of the reasons you’re cutting back on expenses and making a few sacrifices in your business.


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