Financial Management for Small Business Owners from King's Dream.
Updated: 3 days ago
So, let’s talk money, from small business to small business. Here are four financial tips that all companies of our size should follow.
Let’s be real: there’s a lot of bad financial advice out there—especially regarding small businesses' do’s and don’ts. Much of that horrible advice comes from companies trying to scare you into paying exorbitant prices for their questionable services. But when you don’t have money to waste, you’re not taking advice from people you can’t fully trust.
1. Separate Your Business and Personal Finances
This might seem obvious, but depending on your business's size, it may be easier to keep all finances as one. But, mixing business and personal finances is one of the most common mistakes among small business owners. Combining funds makes it easier for your business to dip into your personal funds and vice versa—and it can severely complicate audits. Do you want the IRS on you? Of course not!
So, all small business owners should make sure there’s a clear difference between their business and personal expenses to avoid confusion regarding their business accounting. Set up separate business credit cards and a bank account that are used only for business purposes. Then, use these statements to monitor your business finances.
2. Create a Comprehensive Budget
It’s common to spend recklessly and avoid looking at your checking account. However, business owners don’t have that luxury. When you lack a clear direction for your organization’s finances, it becomes nearly impossible to hit your targets. That’s why every small business should build out a comprehensive budget as a roadmap to setting realistic revenue and expense expectations.
I know, budgeting can be boring, but budgets are vital to company success. And, they aren’t always hard to make. Start with a list of all your income sources and break down your expenses. Ensure that fixed costs (like rent, utilities, and salaries) and variable expenses (like marketing, office supplies, and building maintenance) are included. You should also take unexpected expenses, savings, and emergency funds into consideration as well.
Remember to review and update your budget regularly, as even the slightest changes can dramatically alter your financial situation. Frequent updates allow your business to stay on track and accurately reflect your organization’s economic state.
3. Religiously Monitor Your Cash Flow
Does this sound dramatic? Maybe. But it’s true: cash flow monitoring should stay at the top of your business priorities.
Anyone with a debit card understands how quickly those little purchases can add up, and business owners often find themselves with even bigger expenses. Cash flow, or the money flowing in and out of your company, is the lifeblood of a small business. Improperly tracking cash flow is one of the main reasons small businesses fail. In fact, Business Insider reports that 82% of small-business failures can be directly attributed to poor cash flow management. That’s why keeping a close eye on your cash flow is essential.
Here’s some tips on how to keep your cash flow healthy:
Promptly send invoices and always follow up on overdue payments
Negotiate payment terms with suppliers that work better for your expense schedule
Avoid and remove all unnecessary expenses
Build an emergency cash reserve
Consider options like a line of credit or short-term loans to ensure continuity during seasonal fluctuations
4. Bring in Professional Help
Properly managing your finances is a lot of work—even more than we mention here. The reason we’re cutting this list short is 1) to not bore you and 2) because, at some point, it just makes more sense to bring someone in to manage your finances for you.
Even if you already work in finance, it is wise to seek professional guidance from an accountant, financial advisor, or consultant. These professionals help small businesses make more informed decisions and assist in game-changing tasks like minimizing tax liabilities and uncovering new cost-saving opportunities.
Need A Hand?
Okay, I’ll admit it: KDBC offers financial services. But our difference is that we primarily work with small, minority-owned organizations and other groups that serve underrepresented communities. We do this because we know these groups are most often targeted (or ignored) by predatory financial practices, and we want to break that cycle.
We value your trust, so we want to ensure we’re in a good position to offer you valuable services. If you’re looking for financial advice, set up a free introduction call today!
About King's Dream Business Consulting: Founded in 2019, King's Dream Business Consulting is a small business consulting and management firm established initially in response to Seattle's gentrification and displacement of its minority business communities. To Date, King's Dream has served over 200 small businesses nationwide. King's Dream Business Consulting is a leading provider of business advisory services, offering strategic planning, marketing strategies, financial management, operational efficiency, and human resources consulting. Committed to the success of small businesses, King's Dream Business Consulting provides tailored guidance and support to drive sustainable growth.
Samaria Johnson writes many things, hopefully none of which you consider boring. She loves taking complex information and breaking it down into engaging, understandable content. Samaria’s goal is to only use her words in ways that help make the world a better place.
Comments