Managing the finances of a small business can be quite tricky. While much larger than most people’s personal finances, a small business’s assets have to be handled carefully. Since they don’t have the monetary cushion that much larger companies might have, a wrong move made when financing a small business can cost its owner a lot more than peace of mind. This article is an introduction to a few tips and tricks for managing the finances of a small business.
Outsource a consultant, don’t hire
Keeping the personnel of a small business limited is important. Obviously, your core staff needs to be skilled in their jobs, but there are plenty of tasks where it’s useful to outsource to a consultant, rather than hiring someone full-time to do them. Handling finances can easily be one of these tasks. Obviously, you’ll still need to keep an eye on your money most of the time, but bringing in a financial consultant for advice or special projects will save a lot of money in the long run.
Leave your company room to grow. When you’re just starting out, leave your grand designs for huge office spaces full of packed cubicles behind. Run your company with a core group of people and with projects of a comfortable scope. Basically, don’t bite off more than you can chew, and let your company grow in its own time. Even once you’ve gotten larger and more successful, try new concepts or projects on a much smaller scale before committing fully to them.
Look into accessing capital
Most people don’t have capital, especially after the recent financial crisis. However, a moderately successful business should have some by now, and it’s important to start accessing it. Capital is when, simply put, your money starts working for you. Look for investment opportunities and think about refinancing. This will build your company’s credit and hopefully increase its overall profits.
It’s always critical to have a budget and stick to it. In order to accurately gauge your success as a company, you need to know how much you can spend, how much will be deferred to other costs, and how much you expect to make, to the best of your knowledge. Keeping an accurate budget and sticking to it is a critical first step in any kind of financial analysis.
Instead of spending your company’s profits, reinvest them immediately. This has numerous long-term benefits including increasing your company’s overall assets, increasing later profits, and promoting company growth; rather than the stagnation that can come along with spending rather than investing. Of course, it’s important to balance the cost of an investment with its potential benefit. Most small companies will want to start with smaller, safer bets in order to keep from losing a lot of money or capital in a risky investment that doesn’t end up working out.
These practices can help ensure that your business stays in business for the long haul.