Successful businesses follow the same basic foundational rules, no matter how big or small they are. The laws of economics are universal. Once you know how to apply them, you can use them for your business’s benefit.
Your company is unique, of course. However, the principles of running a business are millennia-old! Why reinvent the wheel when you have so many success stories to learn from?
These nine useful financial tips have been followed by millions of businesses in the past. Now you can put them to good use for your company, too!
Table of Contents
1. Budgeting is Essential
You probably have a monthly budget you try to follow, watching your income and expenses closely. But you have to look at the micro and macro pictures, too.
Do you have a weekly and annual budget? If not, you’re missing out on money that is falling through the cracks.
Budgets guide your expenditures, helping you manage your finances before problems occur. By focusing on in-the-moment financial decisions and long-term goals, you’re able to plan and guide your spending habits better.
2. Add Yourself to the Payroll
Small- and medium business owners are notorious for skipping out on paying themselves. However, you can use your own paycheck to make sure your personal expenses are covered and prevent major stress later.
What happens when you get behind on your mortgage, car, or credit cards? As a business owner, those companies may be entitled to your company’s receivables. Or, you’ll end up digging into your business funds to avoid losing your home.
Instead of letting your bills pile up at home, give yourself a paycheck and keep your personal and professional finances on track.
3. Invest Where You’ll Grow
If your established business is constantly needing money just to stay afloat, something has to change. You shouldn’t have to put all your funds into it after the first year or two.
But at some point, you’ll start turning a profit. At that point, it’s time to start looking at growth investment opportunities.
Would hiring more help let you get more customers? Are your current machines so slow they’re delaying your output?
You might have to spend money to make money, and that’s okay. Invest where you’ll grow, and your profits will increase.
4. Pay Attention to Your Net and Gross Profit
Yes, profit is important. But are you looking at your net or your gross?
Both of these formulas are helpful for different aspects of your business, yet they’re not the same thing at all.
The gross profit formula looks at how much money is coming in versus how much it costs to make and sell your product. Are you charging enough to cover the basics?
Net profit analyzes your revenue minus your operating expenses to see if your business is successful overall.
To learn more about gross and net profit and why knowing your numbers is essential, read this article from Now.
5. Loans Aren’t the Only Way to Get Money
In the past, bank loans were the only option businesses had to get their hands on working capital. These came with long-term repayment and hefty interest rates. But you live in a time where you have lots of funding alternatives.
If you are going through a lull, you don’t need more monthly expenses. Instead, look into alternative lending solutions, such as:
- Invoice factoring
- Invoice financing
- Peer-to-peer lending
- Business equity loans
Don’t get into a long-term loan to solve a short-term problem. Check into your options first!
6. Take Care of Your Business Credit
Your business credit is like your business’s reputation. It’s important to keep it in good health because you’ll never know when you’ll need it.
You might not need a loan or more funding now, but what if you decide to expand in the future, for instance? A lot of vendors require a credit check before they’ll approve invoicing your order, too.
Your personal credit is helpful when you first start your business. Within a couple of years, though, lenders and vendors will want to see that your business has a good financial reputation.
7. Stay On Top of Your Billing Strategy
Getting complacent with your billing is a fast track to losing money. Your clients will come and go. As they do, you need to monitor your Accounts Receivables regularly.
This helps you catch repeat offenders and plan your upcoming budget. You can expect to receive the income for regular, on-time paying clients to cover your expenses.
And if you have a lot of consistently late customers, it might be time to change your policies. Consider adding late fee penalties or slicing the credit available to chronically late clients to reduce your risk. Maybe you can reward clients by offering a recurring payment discount or for those who pay early six months in a row.
8. Keep Up on Your Taxes
Business taxes are one of those things you don’t want to get behind on. Federal and state taxes have different requirements. Your accountant should let you know what to expect, but you should stay up on any changes that might affect your business, too.
Some business owners put aside money each week and make quarterly tax payments. Others pay monthly, treating taxes like a regular operating expense.
Whatever you do, try to stay on top of your tax payments. Getting behind results in costly penalties.
9. Automate Where You Can
Your time is already split into hundreds of responsibilities. It doesn’t make sense to work harder, not smarter.
Today’s businesses have a lot of advantages that weren’t available ten years ago or more. Use them to your benefit to save you time and money.
Automate your daily processes where you can. Even if it only gives you a few extra minutes, those minutes add up fast!
One way to do this is to invest in a customer relationship management software system. These tools are designed to integrate as much as possible into one program, making everything seamless and streamlined.
Successful businesses are cultivated, not born. As you continue to grow your company, use these financial tips from past entrepreneurs. The law of economics will work in your favor, increasing your profit and decreasing your effort over time!