Financial management is a cornerstone for every small business. Learning what to focus on when it comes to your small business finances can take some time, but it is important to start your managing them as soon as possible. According to a Financial Literacy survey, small business owners don’t start thinking about financial management until they have to start preparing for the taxes for the first time.
Follow these tips to better keep track of your small business financial management.
Create Financial Reports
Understanding the financial health of your business is the first step to managing your small business finances. Using financial reports like cash flow statements, income statements, and balance sheets will help you get a snapshot of your business financial health.
- Cash Flow Statement: Reporting the cash inflows and outflows of a company based on particular categories. These statements will allow to understand if your company has enough revenue to appear profitable. By looking at your operating activities, investing activities, and financing activities, you will be able to get a clear picture of where your small business finances stand.
- Income Statement: Your income statement will help you keep track of your income and expenses in one spot. It summarizes the profitability of your business. You can use the income statement to easily keep track of expenses, and you can use this report to analyze how your finances are aligning with your budget.
- Balance Sheet: The purpose of a balance sheet is to report your company’s assets as they compare to your liabilities and shareholders’ equity. It shows you what you own, what you owe, and the amount invested by shareholders.
Create Financial Forecasts and Projections
Financial forecasting goes hand-in-hand with financial reporting. By getting into the habit of creating financial forecasting will be on top of the market trends in your specific industry. This will help you plan your next business year accordingly.
You can also create projections that will help you for what-if scenarios. Forecasts and projections give you a clearer picture of where your business will be in the future, and it will allow you to quickly pivot your strategies to better the position of your small business.
Maintain a Stellar Credit Score
Having an excellent credit score will make managing your small business finances easier. The score is used to determine the credit worthiness of a business by financial institutions, suppliers, partners, and more. Basically, your score can make or break a potential business deal, qualifying for a loan, and even getting the products you need. When maintaining a good credit score, it will get you into the habit of always being in the know of your company’s finances, therefore, improving the financial success of your company.
Pay Attention to Your Budget
Creating an annual budget for your business is an important aspect for any business. By keeping your budget on hand, it will help you manage your finances effectively during the fiscal year. Your budget acts as a financial guideline, enabling you to make the correct choices for future endeavours. By keeping a close eye on it, you will be able to adjust your choices to ensure your business is on the right track.
Your budget should be updated every year, allowing you to make adjustments based on your income, expenses. Here are some tips on how to create the perfect business budget.
Get the Advice of an Accounting Professional
It is understandable that as a small business owner, you may not be an expert in financial management. This is when you should seek the help of an accounting professional. They can offer advice and steer your company’s financials in the right direction. This will help you focus on the other aspects of the business that you excel at. Find out more about outsourcing accounting here.
Software to Help You Manage All Your Business Finances
Find the perfect software for all your small business needs. From managing invoices to accepting payments, to running accurate financial reports, QuickBooks makes it easy to get a handle on your business finances.
With over 5.6 million users in Canada, join them and sign up for the best accounting software for small to medium sized businesses.