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Money Management Tools and Best Practices for Small Businesses
From:
Gary W. Patterson -- Big 4 CPA, Stanford MBA Gary W. Patterson -- Big 4 CPA, Stanford MBA
For Immediate Release:
Dateline: Atlanta , GA
Friday, September 06, 2019

 

One of the most obvious benefits that comes with startingyour own business or entrepreneurial endeavor is the ability to be your ownboss. According to the Small Business Administration (SBA) around 627,000new businesses open their doors each and every year. While this statisticcertainly shows the entrepreneurial mindset that permeates the United States,the other side of the coin is that 595,000businesses close each year, with about 50percent of all new startups closing their doors after the first five yearsof operation.

While being your own boss and the running the show definitelybrings some benefits, one of the biggest challenges for small businesses andstartup brands is installing effective money management practices. Beingdisciplined enough to separate your personal finances from the money tied up inyour small business can certainly be hard, though this is an essential elementfor long-term success. Below, we offer a complete analysis of the best moneymanagement tools and best practices for small businesses and startups.

What is MoneyManagement?

Money management for smallbusinesses and startups entails the practice and procedures utilized to handlebusiness finances. These procedures can include making and adhering to abudget, creating short, mid, and long-term business goals, following andrecording regular expenses and income, and managing other investments. Most ofstartups and small businesses that fail during the first 5 years often sufferfrom unsound money management that subsequently lead to periods of negativecash flow. In the first few of years of business establishment, negative cashflow can cause serious adversity, especially for businesses trying to stay ontop of payments for a business loan.

Being late on payments, forgettingto collect on accounts receivable, and overspending budgets are just a few of thefiscal and monetary problems that generally tend to affect businesses thatdon’t install sound money management policies and procedures. Unfortunately,not all businesses have the financial stability to hire a professionalaccountant to help them deal with the economic aspect of running a business. According to oneestimate, accountants usually charge anywhere from $150 to $400 per hourwhile simple bookkeeping services can easily be up to $50 an hour. Theseelevated expenses can obviously become a major expense affecting smallbusinesses.

For business owners who, due toeconomic restraints, are in charge of their own accounting, there arefortunately several money management tools and principles that can be used tosimplify and streamline transparent accounting practices.

Top 4 Principles ofMoney Management for the Small Business Owner

Keeping your business operations running smoothly requiresdiscipline, control, and a bit of restraint. The following four principles tohealthy money management can allow you to keep your finances under control.

Keep Close Track of Your Spending

One of the challenges that small business owners face ismonitoring the outflow of expenses. When you simultaneously must act as CEO, HRmanager, and customer relations supervisor, it can be easy to forget to recordcertain expenses. Many small business owners have multiple bank accounts fortheir business which makes it even harder to stay on top of the money youspend. Even the smallest of expenses add up, so it is important to createprocedures that make it easy to follow your expenses.

Instead of trying to remember where all your money went atthe end of the week or scribbling down expenses on the back of a napkin,learning how to use free, online accounting software, such as that offered by ZipBooks, can make it much easier to keeptrack of your spending. These easy to use programs allow you to record yourtransactions to stay on top of your spending habits.

Separate Business and Personal Funds

For startups who need a business loan from a bank, one ofthe first requirements that the lender will require is that the owner set up aseparate bank account for the business. Even if your startup didn’t require aloan to get started, separating business and personal funds is essential forfiscal transparency. Bank statements associated with a separate business bankaccount are an easy way to track business profitability, double check expensesand income with your own bookkeeping, and monitor spending habits. Furthermore,when you make it a habit to separate your personal funds from your businessspending, you will have a clearer idea of how successful the business isbecoming.

Monitor Your Employees

Small businesses across the country employalmost 59 million people, making them one of the largest employers in thenation. Unfortunately, not every employee that you hire will share yourcommitment to helping the business grow and flourish. In fact, employee timefraud strategies such as “buddy punching” has been found to cost smallbusinesses upwards of $373million dollars each year. This simple payroll loophole can make or break asmall business, especially in the economically vulnerable early years.

Businesses who want to avoid employee time fraud would dowell to invest in employee time andattendance software that will more reliably and accurately reflect what youspend on your employees. Furthermore, employeescheduling software is another helpful tool that can help business ownersdiscover trends in their employee scheduling, make sure that your business isalways well staffed, while also avoiding over scheduling that can also lead toeconomic losses.

Agile BillingProcedures

Lastly, installing agile and efficient billing procedurescan help to make sure that your business never suffers from cash flow problems.Many small businesses are often strapped for cash at certain times of the year,and waiting on payments from clients can lead to economic crises. In the worstcase scenario, business owners may be forced into yet another loan in order tocover costs until overdue payments are finally processed and received. Agilebilling procedures can help business owners avoid this common headache.Cloud-based billing systems such as FreshBookscan make streamline billing procedures and even increase customer satisfaction.

These four, simple principles of money management can helpsmall businesses and startups avoid some of the most common accounting pitfallsthat can negatively affect a company. With several, easy to use software tools,money management can essentially be digitalized to allow business owners todedicate more time growing the business.

 
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