Adopting good financial habits is one of the fastest and most long-lasting ways to boost your business and drive success. As a business owner, you should not only invest in good personal habits, but those habits should filter over into your business. Having a growth-minded mindset will set you up for success. Rethinking and planning how you approach your business finances could significantly improve cash flow and profitability. So, what can you do to ensure you adopt good financial habits that lead to success in small businesses?
Of course, you must spend money to make money, but saving is as crucial for your business. Savings covers you in times of need – aiding day-to-day expenses or funding your marketing budget as you try new products and services.
So, how do you save when expenses seem neverending, primarily due to inflation and supply chain issues? A straightforward way to develop a habit of saving is to automate the process. As you would with personal savings, schedule recurring automatic transfers from your business checking account to your business savings on the same day each month. By transferring the money, savings are considered part of your monthly operations, and the money is still readily available if needed.
Losing control of your business expenses is easy if you do not have a budget or a monitoring system. Knowing what comes in and goes out can be beneficial to your business’s success.
We suggest investing in a bookkeeper or accountant to manage your books. Meet with them weekly to understand your spending habits and where you can reduce costs. If you choose to manage your accounts, look for trends, such as increased or decreased expenses. Consider where you can cut certain expenses that don’t benefit the business. Track your expenses easily to your accounting software by linking your business credit and bank accounts.
Failing to plan is planning to fail. When wanting to grow your business, outlining your financial goals and every step you need to take to get it is crucial. It would be best if you got into the habit of setting financial goals each year with a clear timeframe. As with personal goals, ensure they’re SMART (specific, Measurable, Attainable, Relevant, and Time-bound). Review your goals quarterly to track your progress and adjust your plan if needed.
It might sound odd, but not all debt is bad. Certain types of debt can drive business growth. However, you need to understand how to manage your debt to use it strategically and make smart financial decisions for your small business.
Revising your monthly profit and loss and cash flow statements and monthly balance sheet will help you comprehend and improve your business’s financial health. By understanding the operational finances, you will know what debt repayment your cash flow could sustain for the short or long term as your business expands and grows.
Small business financing not only helps in times of need but in times of growth. Use your funding efficiently and effectively by planning for it. List how you intend to use the funds and how it will contribute to growing your business and reaching your financial goals.
Perhaps it’s to help with your savings, cash flow, future products and services, or to pay off debt. Whatever you choose to use small business financing for, plan it. Financing has many benefits and can set you up for success.