Running a business is a tough job – it can be stressful and the moments of decision-making can be crucial. Throw some money into all of that and you’ll lose your mind if you don’t know what you’re doing. So to make sure your business stays afloat and you don’t make mistakes, here are expert tips to handle your finances.
Get Organized
The last thing you want is to be losing money without even knowing it, and you’d be surprised how often that happens if you don’t keep clean records. And by the way, clean records mean no paper and print. You want everything digitized and in one place. Find a system that works for you – it might be a specialized piece of software or just a google spreadsheet, but you need to be able to get any piece of information as soon as you open the page. This isn’t only to track things for taxes and overview, but it’s also to track trends. Trends will let you see the bigger picture of how your business is going and allow you to notice patterns you might miss otherwise.
Have a Strategy
It’s crucial that you have a good business plan in place. This should include everything from production and marketing to financial strategies and planning. This is what allows you to both have different options depending on how the business is performing and adjust course. If you have no plan and no strategy, you’ll just be going in blind, with no estimates to compare your actual results. Your strategies should cover many possible financial outcomes and have safeguards set in place in case things go south.
Get the Pros Involved
If you’re a small business owner wearing many hats, one of which is maybe as a CFO, odds are you don’t know what you’re doing to the perfect detail. You might know the basics, but there are many things that might go over your head, and on top of that, you’ll be spending far more time handling the finances than needed. So, it would probably be more efficient to get someone who is proficient in accounting and finances, either on a full-time or a freelance basis.
Know When to Invest
The biggest financial pitfall for any company is the wrong investment. If you don’t think things through, tunnel vision or act impulsively, you’ll end up making the wrong choice and flushing your money down the drain. Remember those business plans we mentioned? Stick to them. Don’t just invest right and left hoping to get a return if that doesn’t align with your business plan. You also want to avoid the dreadful sunk cost fallacy – the idea that things you invested a lot in will keep dragging you down and pulling you to invest more, even though you’d be much better off kissing that money goodbye.
Being financially smart is a skill and an art form, so if you’re not sure how you should act, it’s best to consult with an advisor than to make an uneducated decision that could lead to financial ruin.