Finance

Things Every Small Business Owner Must Know About Money Management

Running your own business means taking control of the finances, whether you like it or not. It can be a scary prospect, but with the right knowledge to hand, you’ll find it much easier to get through the ups and downs of running a business. Here are our top tips for making sure you have firm control over your business’ money management.

How can you manage money when there is no revenue?

The first step is to create a business plan. A business plan is a document that outlines your business’s goals, strategies, and policies. It’s basically a blueprint for your business because it lays out your game plan for how you’re going to make money. Next, you need to create a budget. You can either use an online spreadsheet or cobble together one from scratch. For all of our tips for budgeting and budgeting strategies, please visit our Budgeting page! Once you have a budget in place, you’ll want to assign tasks and pay everyone from senior management (yourself) to your newest employee to get your business off to a great start.

To make sure everyone has their fair share, we recommend you assign percentages, like 20%, 40%, etc. You may also want to write down “bonuses” the company may receive, go into detail on how you calculated those bonuses, and include them in your budget! If you’d rather keep things simple, we can run through a budget and assign tasks here: Business Budget and Tasks. Once you have tasks assigned and people paid, you’ll want to monitor how your business is doing.

To do this, we recommend prioritizing based on your business goals, revenue, performance, and vs. competition, which will help you quickly assess your personal business and see what your “ups” and “downs” maybe. We’ll go into detail on how we do this in just a second. For now, just utilize our handy dandy Profit & Loss Chart. When you view a chart like this, simply toggle drop-down to see your detailed insights: How your business’s financials have changed. Any time you go to make a projection for how your business is going to do over the next year-long period, be honest and accurate. This way, you can evaluate changes that may have occurred because of the pandemic in much the same way you would have if you were to run your business blind.

Why do you need to manage your cash?

Money is a limited resource. Managing your cash means keeping track of how much money you have and how much money you spend. It also involves making plans for your future and how you’ll make more money. In this section, you’ll learn about cash management and how it can make a difference in your personal and professional life. Create a budget: The first thing you need to do is establish a clear budget. Setting a budget will help you understand how much money you have and what your goals are for your business.

BUDGET ACCOUNTABILITY TIPS:

Budget for recurring operations: This starts with keeping track of costs you expect to incur. Determine how much you spend on marketing versus ads, how much you spend on your phone bill and Internet service, and where your money can go to influence your business goals. Don’t forget to budget for new technology. Install software: Eliminate hangups around keeping track of your receipts. Be sure to keep QuickBooks and Xero Pro at the ready to back up receipts for monthly expenses. Set up transactions to pay vendors, team members, vendors, and other business costs. This will make sure you don’t forget to pay yourself.

Use Quickbooks Online to book flight reservations or make physical purchases. Is your rent due on the 1st? Pay it right away by using Quickbooks Online and Xero Pro to set up automatic deposits in your bank account. Make sure your bank knows you are renting space. Add SkyScanner to your computer to get online rent payment reminders. Find money: Looking for your next job? Make sure you have plenty of money in savings and invest it wisely. Invest and save for investments you know you can make money on. Start with business credit cards so you can get the rest of the benefits from your credit cards. You can also use the leftover money from business lunches to invest in other deals such as business license options, another business loan, or mutual funds.

What are the three stages of business cash flow?

Business cash flow is the movement of money into and out of a business. Cash flow is generally divided into three stages:

1) Inflow: Money coming into the business from sales and interest, for example.

2) Outflow: Money going out of the business to cover costs and expenses, for example.

3) Pre-tax cash: Money coming into the business before it’s been spent or at a business level, for example for company cars, dinner out, or keeping a business computer working. Different types of businesses tend to have different cash flows. News sites, for example, typically have a higher pre-tax cash flow than online clothing manufacturers. Dental practices, on the other hand, tend to have the highest inflow of cash.

Tips for managing the flow of cash throughout your business:

Set up personal finance alerts. You can set up any number of alerts using different websites, including Mint.com, Charles Schwab, and Quicken Loans, all of which provide a simple way to hold yourself and your business accountable to keeping track of your finances.

Learn to budget and audit your bills. There are plenty of simple ways to do this. We recommend a paperwork audit, a method by which you document the actual cost of a potential expense, both in and out of your business. Then you can audit your bills strategically to see if they add up to operating costs. Here’s a great article on personal finance auditing with estimators.

Acquiring businesses is risky business. We don’t enjoy putting additional personal expenses on our budgets, but the key is to ensure that when you buy a business that it can work if you want it to. The greatest risk is forgetting to plan for the potential ups and downs and how a business can work in just a few short years. Start small. Start with only a few rentals and a small office. You can always expand your business and hire more people later.

Understand pre-tax cash. The majority of business income is taxed at a pretty low rate.

What is a cash flow forecast and why do you need it?

Cash flow forecasting is a great way to keep track of how much cash you have coming in, how much cash you have gone out, and how much cash you have leftover. You can use this information to make sure you have enough cash on hand to cover your business operations and to make sure you don’t overspend. If you don’t have a lot of cash reserves, your business can suffer. If you want to make sure you’re running a successful business, having a good handle on cash flow is a must. Keep detailed records of all cash flow and corporate expenses. It makes it easy to analyze trends and keep an eye on cash flow deductions. PowerPoint presentations you make before putting your team to work are a great way to show them how you manage money. You can also show them how to set money aside for cash flow over the year. When you pitch your budget to your investors and lenders, give them a complete budget including every expense like boxes, envelopes, stamps, and envelopes of cash.

Dividing the money between your different business accounts gives them a clear picture of how much money you have in the business, how you intend to use it, and how much you have leftover at the end of the year to cover business expenses. Make sure your investors understand how they can recover their investment over the long term and that you can be counted on to make monthly payments. When you’re showing your potential contractors how you deal with problems, pay attention to depreciation and cost segregation. Building a business is expensive, and every bit of money you invest is a chance to save money. Make sure the contractors who have worked for you for the longest amount of time know exactly what you expect in terms of payment and workmanship.

How can you keep track of your cash flow?

Cash is king and the only thing that matters is how much you have and how much is coming in and going out. This is why it’s so important to keep tabs on your cash flow with Jyngles – Budget Planner. One of our direct mail campaigns is all about utilizing automatic drip campaigns. It’s a paid service that automates the sending of a letter to your subscribers. We set up the automatic mailings and collecting of payments so that a few phone calls and emails per month turns into a steady income.

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