You can have excellent staff, great service and strong leadership skills, but if your financial situation is in disarray it’s going to be tough for your business to succeed. As a small business owner, you have to have strong budget habits. Here are three best practices for maintaining your finances and monitoring your cash flow:
1. Organized from the beginning
If you’re starting a small business with a pen and a piece of scratch paper; stop. Brainstorm all you want on white boards, but when it comes time to be serious about your company’s financials, you need a consistent system of capturing data, reporting transactions and measuring profits.
You should create standard terms and documents so every member of your team has consistent reference points. Small Business Branding said you should prioritize financial reporting and realize every single dime that goes towards your business is important. An easy way do this is to make budget practices simple to perform.
Financial software for security companies is a good choice. You can start on basic spreadsheets, but eventually you’re going to want a software solution that integrates customer payments, bank information and the activities of numerous users into a central source. It might be best to find an organizational tool that is flexible enough to keep up with growth, instead of constantly changing systems.
Convenient digital tools can help you keep track of your budget.2. Separate personal finances
You invest a lot of your time and energy into starting a small business, but if you’re going to contribute money, you need to keep a complete record of it. You should keep your personal and financial budgets completely separate. If you’re going to transfer funds from one to the other, you need to do it officially. You should, of course, pay yourself and if you want to lend the company money from your personal account, track your contributions like any other investor.
Inc. magazine listed several benefits to keeping your financials separate. A complete record free from personal numbers looks better when communicating with investors and lenders. Not mudding the financial waters is important for prevention of litigation or other problems. Your contributions should be clearly labeled and accounted for in your security business software solution.
3. Create realistic goals and backup plans
You should keep an eye on your budget. You want to sit down and write out clear plans for your company and what you expect from your cash flow. The U.S. Small Business Administration said consistent monitoring of your budget activities keeps you informed about the performance of your early projections and lets you know when they need to change.
When creating goals, you want to be practical. You must determine the lowest possible numbers necessary for success and hold yourself to long-term plans. Some small businesses may actually see positive cash flow early on. The instinct may be to splurge, but you want to save early windfalls for rainy days.
Don’t break your early budget guidelines at the smallest hint of success or failure. Create a plan that prepares for the worst and use constant supervision of cash flow activities to inform future decisions.