Review your current accounting measures and consider how well they are working for you. If you haven't already, hire a good bookkeeper or purchase DIY accounting software – even if you're a small business, a spreadsheet just isn't going to cut it. It is crucial that you keep accurate track of your income and costs.
This could be an obvious one but when things get busy, it's easy to lose track. So, make sure you're keeping track of all of your small business expenses. These can add up quickly, but reviewing them allows you to fine-tune where your money goes.
Having clear financial projections is important. If you don't know where you want to get to, how do you know how you will get there? And more importantly, how much you need to spend along the way? Your main business plan will help you to anticipate and address possible future obstacles.
Send out invoices as soon as possible after providing goods or services.
Set payment terms of seven days to make sure that payments are not forgotten or lost in the process.
Always follow up on sent invoices. You can make this easy by creating set templates for email or SMS follow-ups.
Reference invoice numbers and cross-reference these with payments.
| Response | |
|---|---|
| A business loan | 44.98% |
| I have savings | 37.47% |
| Friends/family | 6.03% |
| Government grants | 5.94% |
| Other | 4.8% |
| Crowdfunding | 0.79% |
Mixing business money with your personal finances is a recipe for unexplained losses and tax-headaches. Keeping your business's money separate will make gauging profitability easier and help you to keep proper track of your expenses.
Keep accurate records of what you loan to your business. When your business starts making money, you can easily pay back the director's loan first before paying tax on the remaining profit.
This doesn't mean taking away all of the business' profits – start with 10% of the earnings. This is a good way to set aside money consistently and to test the profitability of your business. It also provides a safety net for unexpected expenses.
Even though you pay yourself, don't get sucked up in the benefits of business ownership even if you can afford it. Set your salary as low as you are comfortable with and offer government-mandated benefits only. What you save now will give you more flexibility in future lean months.
Travel can be a great investment for your business – if it's done right. Don't overspend on luxurious travel and accommodation. This sets a bad precedent for employees and can be an unnecessarily large cost with little return. Plan your business trips as if you were paying for them yourself.
Don't let legal fees get out of hand. Look into reasonable costs for legal fees and consider whether your business can afford it. When engaging with legal services:
Make your expectations clear to your lawyer when procuring their services.
Choose the billing option that is the most cost-effective for your business, for example, hourly or per project.
Ask whether it is possible to defer payment until the project is funded.
There are various kinds available online – why spend more than you need to?
Make sure expansion is done steadily and wisely. Pushing large amounts of money into expansions that are too quick and too drastic can be disastrous.
If you have the capacity to complete marketing and PR efforts yourself but don't have the expertise, hire a consultant. You can gain the benefits of their expertise without paying for their services long-term. You just need to be willing to put in the work yourself.
Leasing equipment instead of buying helps you avoid maintenance costs and can also prevent you from overpaying on equipment only needed for a specific period of time. You could also consider looking into other cost-saving measures, such as shared workspaces or renting out your own office space to others.
An easy mistake to make is waiting until your business is in financial trouble before applying for loans or other credit. This is exactly when you will be least likely to receive financing. Apply when your financials are still in a good state. This way the loan can be used for expansion or as an emergency line of credit when you need it.
Small businesses often do not have enough capital to get themselves through the startup phase. To prevent this, have three months' living expenses saved plus the amount you are expecting to need for the first three months' business expenses. Plan as if you expect to receive no business revenue.
Don't go big on business cards, sign writing, marketing materials, cars or inventory before any actual revenue comes in. This can create a cash flow blockage.
We assess over 150 business loan products for their rates, fees and important features, assigning them a score out of 10.
We assess over 150 business loan products for their rates, fees and important features, assigning them a score out of 10.
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