When you're a business owner, every choice you make, from where to spend your money, to what to charge for your services makes a difference. A small business has to do a lot of things to stay afloat, especially with so many new companies popping up both in brick and mortar spaces and online.
It's essential to keep tabs on every aspect of your company because if you're not up-to-date, issues have a propensity to snowball. Smart financial moves make the difference when sales don't go as planned, or a pandemic happens.
So, what can a business do to stay financially fit in the face of uncertainty?
Look down the road five or ten years and think about what could happen. Will your current business model be able to sustain? Forecast what your business growth and finances will look like, and work towards achieving it. Start saving for a new product launch, or to hire additional staff. Think about the facility you've always wanted and start the planning process now. Plus, having a nest egg is vital in case the unforeseen happens.
Know Your Credit Score
Keeping track of your credit scores, both personal and business, is essential because your credit score follows you. Many lenders and suppliers will check your personal credit score to determine if you are creditworthy.
You're a small company not armed with millions like a large enterprise. When someone wants to know why your finances look outstanding or bleak, it's going to fall back on you. Proper borrowing behavior will save your business money because lenders won't see you as an investment risk. And with a solid borrowing record, you are likely to be offered a lower interest rate.
Stay on Budget
A budget is vital to the health of your company. It can be hard to stick with a certain number because it seems there is always a new tool or program that could change things. Critical factors should be focused on and prioritized. Set up a budget based on monthly expenses and work to stay within that number. If you want to buy something new, create a budget line for miscellaneous purchases and only spend the allotted amount.
Review Your Books
It can be tough to make time to review your financial standing, but its a critical task. Carve out time every day, or at least once a month, to take a look at your books. Even when working with an outsourced accounting company, like Basis 365, its best to know what's coming and going, and where cash is available. Understanding how your money is managed will allow you to spot an amorality if one should appear.
Prepare for Down Time
If we've learned one thing in 2020, it's things can change on a whim. Just because a product was highly sought after in the first quarter doesn't mean it will be in the next quarters. Set up a rainy day account when things are prosperous and budget accordingly. While you don't have a crystal ball to see what will happen, if you have emergency funds available, you can weather the lean times when inventory cost and payroll are due, despite little to no income coming in.
Going paperless may be the most straightforward task of them, as almost every aspect of money and asset management is online. You can automate payments and invoices within your accounting platform and set up immediate alerts. Plus, going paperless is good for the environment.
The Wrap Up
It's important to understand that financial fitness begins with a plan and a budget. Your willingness and ability to stick to those two things is what will keep your cash flow and business healthy. By making smart financial moves, you will be well-prepared for any surprise situations or new ventures.