If you’ve recently decided to turn a side hustle into a full-time gig, you’re well on your way to becoming a small business owner. Yet one of the biggest mistakes you can make is failing to manage your money in a responsible manner.
Every business, big or small, needs to manage money effectively. This can get harder as an enterprise grows from a side hustle done in your spare time to a business demanding your full attention. For those in this situation, the following tips should help:
Tracking Cash Flow
One thing that smart business owners should do is track their cash flow. Now, to do this, you’ll have to start performing cash flow analysis on your small business. The reason you are doing this is to see how much money is coming in and out of your company.
It may not seem like a big deal now, but having a clear view of your cash flow confirms that your business is making more than it is spending. A business that is generating more than it spends is going to be able to address debt or make additional company-focused investments.
Separate Account if Needed
One thing that small business owners tend to do is forget how important it’s to separate personal funds from business funds. In the beginning, it makes sense to have all the cash going into one account, especially if your business is not making that much, but the reality is that this is very important.
Business owners who do not separate these funds have a hard time tracking their cash flow and can sometimes be tempted to dip into their business profits, and that’s going to hurt you. If you haven’t done so, go ahead and separate these accounts.
Time Expenses and Purchases
Business owners need to make sure they begin to move payments and purchases around on the calendar. Once you’ve analyzed your cash flow for a few months, you can see when your flow is favorable and when your flow is a little thin.
You want to make sure that most of your payments and purchases are made around the time your flow is favorable to you. This reduces the stress you are putting on your company when things are a little tighter during the month. Do not allow yourself to forget to monitor your flow because it can change, and if it does, you should try to change with it.
Work on Your Inventory
An inventory that is not managed well can end up taking too much of your money. You do not want to put your business in this position. What you want to do is go ahead and actually invest in inventory management tools that can help you see what items are sold more often and what items aren’t sold as much.
Having this information allows the business to focus on purchasing items that actually need to be replenished. A good inventory management tool is also going to show you if any products should be taken out of circulation altogether. Doing this should help you save some money, which you can use to invest in other items that might turn out to give you better returns.
Slash Costs as Much as Possible
The next thing you want to do is make sure you start working on cutting costs as much as possible. Refining your inventory is one way to do it, but you should definitely take additional steps to reduce other expenses like if you are still using paper you should switch to digital, which is cheaper.
If you can combine two jobs into one, then try to do this so that you can reduce the number of people working for you. You should also see if other vendors are willing to give you a better price then what you got.
These are just some tips that small business owners should consider adopting to manage their money more effectively. It may be a good idea to hire a budget expert to help you sort through your finances.