After years of dreaming, a person might finally have the opportunity to operate their own small business. But maybe they aren’t quite sure how to deal with the financial side of it. Perhaps they only desire to put in the physical or creative work that is the essence of the business. However, they can easily find themselves in hot water if their cash flow is non-existent. Tracking expenses and revenue are a critical part of running a business, especially if there are employees. Check out these four simple ways to manage a small business’ finances.
Open a Commercial Bank Account
It may sound a tad elementary to say to open a checking account for a small business, but it needs to be said. Small business owners should choose a bank that is small business-friendly. Business registration documents and licenses should be brought to the bank and an initial deposit should be in hand. The minimum amount varies, so it’s important to learn how much will be needed beforehand. Bank representatives can be asked about qualifying for a line of credit. This will be beneficial with business purchases and to cover unforeseen costs.
Accept Various Forms of Payment
Receiving cash for services is always a great way to obtain payment. To stay competitive, business owners must be able to process debit card, credit card, and electronic cash payments. They shouldn’t be the business that is stuck in the past. Today’s business environment deals in quick, secure financial transactions. That’s a benefit for all parties involved. Accepting charge and electronic payments comes with processing fees and possible equipment rental. Shopping around for merchant accounts like High Risk Pay that offer the best competitive costs in imperative. Customers expect these choices, which result in more sales.
Balance The Books
Depending on the size of a small business, the owner may decide to use an old-fashioned ledger and record handwritten figures. However, accounting software like QuickBooks and FreshBooks are optimal, user-friendly programs for small businesses. Balancing a business ledger is like balancing a personal checking account. It gives the business owner an accurate picture of what is really going on with their finances. Errors can be found easily, as well as omissions in expense and profit tracking. Recording exactly how much money is receive and how much is paid out is crucial. That includes transactions for customers, vendors, employees, and personal accounts.
If a small business accepts payments after services are rendered, business owners shouldn’t rely on oral commitments or handshake agreements. Creating invoices that include payment terms and submitting them to clients can be helpful. Business owners should also clearly indicate on the invoice when the payment is due, such as within 30 days or upon receipt. A definitive due date sets the expectation for a client. It also helps determine what the monthly revenue will be. Business owners also need to remember to add itemized charges, methods of accepted payment, and their mailing address. How can someone create invoices? With one of the accounting software programs mentioned earlier.
By following these steps to manage a small business’ finances, business owners can concentrate on growing their business. A budget is also a necessary evil for keeping it afloat. Keeping detailed records of transactions will allow business owners to do that.