Running a small business is about more than just the services that you intend to provide to others. Running a small business is also about money management. You need to have solid money management skills in order to successfully run a small business.
Separate Borrowed Funds & Account Receivables
Make sure that you keep any money that you borrow for your business in a separate fund from the money that you bring into your business from accounts receivables. Keeping your borrowed money and accounts receivables in different funds will make it easier for you to see what money you are bringing in and what money you need to pay back. If you want to use the money you borrowed for specific investments or expenses, keeping your borrowed funds separate will help ensure that you don't end up using the money for normal operating expenses instead of the expenses that you budgeted the funds for.
Hold Clients Accountable for Their Balances
Second, make sure that you hold clients accountable for their balances. Make sure that your receivables and the actual money in your account match as closely as possible. Set up strict payment schedules for clients and hold clients to those payment schedules. Enact consequences when customers do not pay their accounts on time, and if necessary, engage the assistance of an outside company to collect long-withstanding debts.
As your client lists grows, make sure that you have someone in your company who is specifically assigned to dealing with receivables. Your account receivable department or job duties are integral to your business's success.
Set a Minimum Monthly Profit Goal
It can be really helpful to know what your minimum monthly profit needs to be in order to pay all of your regular expenses and obligations. Take some time to figure out how much money you need to keep everything in operation and still bring in a small profit each month. This is your minimum monthly profit goal.
Having a minimum monthly profit goal can help drive your business decisions. Knowing how much money you need to bring in can help direct decisions you make about your business, especially if you need to increase profits.
As a small business owner, keeping track of your finances is extremely important to a successful business. Keep your borrowed funds and accounts receivables separate so you can ensure that you are using both funding sources properly. Make sure that you hold clients accountable for paying their invoices and have someone tasked with account receivables within your business. Set a minimum monthly profit goal that will help guide your business decisions and ensure that you keep your business afloat. If you are starting a new business and need help with any of these things, contact an accounting firm to help with your money management.
