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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
Financial Management for the Small Business Owner
As a small business owner, you might have the technical skills that set you apart in your field or service area, but you probably aren’t an expert in other areas of business management. Your product might be impressive or your people skills on point, but unless your areas of expertise is a business that offers accounting or investment services, you might still be green when it comes to managing finances. According to the information released by the Small Business Administration, running out of money is the number one problem of small businesses. This doesn’t just hurt the owner or entrepreneur. It can create a ripple effect that could potentially impact the economic conditions of the local community. The best way to make sure this doesn’t happen to you is learning about what it takes to run a financially healthy business. If you need a crash course in the area, consider these ways to manage your finances and your small business on solid financial ground.
Adopt a Customer-centric Attitude
Taking care of your customers will be the ticket to sustainable revenue. Consumers bring revenue, whether through their own initial purchases or their referrals to other individuals. The customer may not always be right, but you would do well to remember that the customer is always important. Delivering a high-quality product and a superb customer experience will determine the success or failure of your company. One good experience isn’t enough. Consistency is key, as increased referrals and word-of-mouth marketing will be some of the best ways to attract new consumers.
Know Your Budget
Some owners only think about their operating budget once everything has been running for a while and income and expense seem to have evened out. You need to understand the costs of running your business long before you open your doors. Every area of your company should have a budget line, whether its the cost of utilities, paper products, computer security systems, or marketing. Without knowing the bottom line and areas of impact when things get out of whack, you can easily lead your company down a dead-end road to nowhere productive. It also easier to spend you don’t have allocated for a certain line item or budget category, but these unbudgeted expenses can quickly add up to a significant amount that blows your spending plan apart.
Establish Emergency Resources
Financial advisors caution the average citizen to have enough money in savings to cover two to three months of their lifestyle. This is the emergency stash. Your small business will need this same type of fund. In the event of an emergency, not having the money you need to take care of it can ruin your business. You can’t materialize cash out of thin air or expect a sudden influx of business to carry you through. Proactively establish a savings account that you contribute to each week. If your business does fall under hard times, you are always able to look at external funding options. A small business loan from a traditional lender, a venture capital investment from an expert like Mark Stevens, or a contract with a factoring company might be the bailout you need. However, it always wise to set money aside for emergency situations.
Utilize Your Cash Flow
Although convenient and helpful in a pinch, continually relying on credit accounts for financial support is nothing but a recipe for disaster. You need to understand the details of your cash flow and balance the day-to-day revenue and expense transactions. You need to bring in more than your overhead costs and inventory purchases if you are going to establish positive cash flow. If your reports show that you are spending more than what you are taking in, you will need to revalue how the cash is being managed and make some changes. The first way to bring things back under control is to find areas where you can cut costs. Make the payments you need rather than relying on credit to carry you through. Tighten your control on the cash flow, and you can avoid eating up your profit in interest charges.
Invest in Accounting Software
Since you may not be a financial expert, your saving grace could be a quality accounting software. A computer is more equipped to handle the complexity of accounting functions, as well as the filing and tracking of invoices, payrolls, purchases, and reporting. Many of the designs for small business owners are user-friendly and cost-efficient. While there are still programs available to be used with laptop or desktop computers on-site, using cloud-based services are accessible from anywhere and can often deliver reporting or notifications directly to a smartphone.
The finances of your small business need to be given your focused attention, as mismanagement will have your doors closing and your entire investment disappearing into thin air. You don’t have to be a business professor to follow these key areas of financial management.
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