When you’re launching your small business, staying on budget and keeping your finances balanced is a must. After all, you believe in your company, and you know you have something special to offer your customers and employees. Therefore, it’s time to put a plan into place that can help secure your small business’s financial health, now and well into the future. Read on for some tips about how to start this process.
These small business financial health tips have been provided by Ted James. As a one-on-one financial coach, Ted James has seen and helped it all. He created his site, Ted Knows Money, to share money tips and help people get complete control of their finances.
Create a budget
Your first step in reviving your business’s financial health is to set financial goals and create a budget accordingly. Begin by listing and calculating all your current expenses and income. Your accounting software has reports that can help you do this. Next, compare your income and expense columns. If you have more income than expenses, you’re doing okay — at least for the moment. If you have more expenses than income, you definitely need to make some changes.
As you work to balance your budget, you may have to cut some costs. This may be painful but begin by looking for areas where you’re spending more than you’re receiving in benefits. If you’re paying too much for software, look for open-source replacements that do the same job without licensing fees (Odoo and ERPNext are two excellent open-source options that small businesses can utilize for accounting and inventory management). Reexamine your credit card processing services, and see if you can switch to a credit card that’s less expensive. Carefully go over your production costs, too, and make sure there’s no waste.
Even as you cut your costs, work on increasing your income. Try to draw in more customers by offering discounts, rebates, coupons, or complementary products or services. Also, reexamine your pricing strategies to make sure you’re not pricing too low and cutting into your profits or pricing too high so as to discourage customers.
Whether your goal is to achieve greater financial security and stability or to expand your business, it’s also worth looking for ways to have multiple sources of income.
If you’re having trouble collecting payments from customers, revamping your invoicing process is one way to boost your income. Send out invoices immediately upon completion of services, use easy-to-understand language, and accept multiple payment methods. You can even create branded invoices by using an invoice template and adding your own logo, colours, and design elements.
Pay off debt
As you balance your budget, try to increase your monthly payments so that you can pay off your debt more quickly. Consider, for example, dedicating extra income directly to that purpose. Also, research methods of debt consolidation that you can use to reduce your payments and/or interest rates and get your company back in the black as soon as possible.
Choose the right business structure
Next, consider your business structure. Forming a limited liability company (LLC) gives you greater flexibility and tax benefits, while your personal assets will be protected in case of litigation against you.
Registering your LLC typically only takes a couple of steps, including choosing a name and preparing the required document. Check the rules in your state/country before taking any steps, and use a formation service to help if necessary.
Get some help
Finally, if you’re overwhelmed by your business’s financial situation, get some help. Contact a financial consultant who can offer a different perspective and some new ideas. Also, consider applying for some business grants to get you over this rough patch. Before you apply, know all the requirements, have your business plan in place, and look for grants geared to your industry. Also, make sure your applications are completed with impeccable accuracy.
Be debt free
By creating a budget, cutting costs, increasing income, paying off debt, reorganizing as needed, and getting help, you can make your business debt-free and bring it back to financial health.