10 Things Every Small Business Owner Should Know About Finance
- September 19, 2020
- Written by : REIL Capital
As an entrepreneur or small business owner, it is essential to understand finance, especially knowing how it affects your business.
Finance plays a key role in starting, operating, and growing a business. Thatâ€™s why we broke it down for you in the very same way.
- Establish a Budget
Firstly, establishing a budget will ensure that you are managing your finances efficiently throughout the year. This is a plan for spending and saving, while you plan your financial future. Knowing this will help steer you in the right direction in terms of maintaining and growing your business.
- Find a Payment Method Accepted in your Industry
Depending on your industry, different methods of payment will be accepted. Some of these include Stripe or Square. For example, if you work in the weapons industry, fewer methods are available.
- Every Cent Matters
Pay attention to the details when it comes to finances. It is because, small costs can add up, and bigger expenses can surprise you. This works the same for profit; if you notice something that is working or benefiting you financially, youâ€™ll want to continue doing so to maximize your profit.
- Learn an accounting software
QuickBooks is a great, and very popular, example of this. Thus, you can use this software for everything from creating invoices to billing to payroll. The software makes it simple for you; you just enter and store your data, and the program will analyze the data for you.
5. Need to have enough capital to endure hard times
Tough times are inevitable when starting your own business, whether the difficulties rise mentally, physically, or financially. One great way to ensure you are able to move past or handle these times is to create a business savings account. Donâ€™t get shocked by a big cost, and donâ€™t put yourself in a situation in which you cannot pay a pill or contribute financially to your business while in need.
6. Track Your Expenses
Tracking your expenses is not only a great habit to adopt, but it is a great way to manage and understand your spending habits. Tracking will help you see the bigger picture: what are you spending too much of, what are you buying too often, and how can you save more money, instead of spend it?
7. Reconciliation at the end of every month to match to bank statements
Do this to catch any unusual behavior or errors in your transactions, and also to have a clear understanding of exactly what is available to you in terms of additional or unnoticed funds. To properly perform reconciliation, youâ€™ll need your bank statement and your internal accounting records.
8. Pay Attention to ROI
Are you getting back what you put in? ROI, or Return on Investment, is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. If you fail to pay attention to this, you will more than likely begin to give (pay) more than you receive.
9. Start a Habit of Checking Profit/loss and Balance Sheets
Reviewing these sheets on a weekly basis will help ensure that your budget remains accurate. Also, youâ€™re not going over on expenses, and you are continuing to make a profit.
10. Understand the Upside of Loans
As a small business owner or entrepreneur, you probably wonâ€™t have the time to waste applying for funding through traditional banks. With long terms and low interest rates, getting an SBA loan is a great way to grow your business, increase working capital, purchase equipment, or refinance existing debt.If you think this would benefit your company, head here.