Your small business is unique, but there are certain money-saving-habits every company should practice to improve finances and cash flow.
We’ve pulled together some of the proven best practices that will set your company up to be more efficient and ensure you are on track to achieve heightened success.
Make Reviewing Your Finances a Habit
As a small business owner, you have taken on a range of roles and responsibilities that fill your days, weeks and months, but you may be forgetting one crucial step.
No matter how confident you are about your business’ financial well-being, this is something that needs to be reviewed regularly by adding a detailed financial review to your monthly or weekly schedule.
Based on the time of year, level of demand, and the type of contract services you offer, your flow of income and expenses will likely vary from week to week and month to month. Having a clear understanding of your current, and projected, finances will help you make better decisions concerning your spending and budgeting.
Additionally, this top money habit will help you better understand full-scale operations so you can determine what changes you can implement to inspire growth within your company.
Create (and Follow) an Every-Dollar Budget
Knowing the comings and goings of your money dramatically reduces stress and enables you to understand at any given time whether or not you should make a purchase, set aside additional funds to pay down an outstanding expense, or whether you will be able to cash flow your expansion plans.
Budgeting seems obvious; however, in common practice, most businesses fail to implement this vital money-saving step. And even those that do often do not track exact spending, choosing to instead to round numbers off.
For a successful business, you must create an every-dollar budget and then follow and execute that budget as exactly as you can.
Whether you set up a monthly or quarterly budget, it’s crucial to determine your predicted income and known expenses to generate precise numbers concerning additional spending and savings.
Creating and enforcing an effective budget may take time, but the effort spent is well worth the time. While you may initially think a budget is designed to restrict, it’s actually designed to free.
Reduce Unnecessary Spending by Managing Your Inventory
Comparable to a regular review of finances, you should also routinely review and manage your inventory. This is most easily accomplished through auto-generated inventory reports.
By reviewing your inventory, you should compare what’s coming in, to what’s going out, and at what rate so you can identify cost-saving possibilities.
From there, you can determine if there’s an opportunity to source items you need to restock more cost-effectively, along with how to adjust your future orders to meet changing demands. You may also need to re-evaluate and determine which approach to inventory management (LIFO, FIFO, FILO, or LILO) is most beneficial to your business.
Plan Ahead for Tax Season
By planning ahead, when the time comes to pay taxes, your finances aren’t hit with a huge expense all at once.
You can use your taxes from the previous year to predict what you’ll owe the following season and regularly set it aside throughout the year.
One of the best money habits you can put in place for yourself is to prepare for future known expenses, including federal and state taxes. We strongly recommend working with a Certified Public Accountant (CPA) to ensure you’re avoiding costly mistakes, taking advantage of all tax breaks, and correctly reporting all relevant activity.
Take Advantage of Tax Deductions and Benefits
Think of tax breaks as “free money.” As a small business, you have multiple money-saving opportunities when it comes to deductions and write-offs, and a CPA can help you find all of them. Invest the time to educate yourself on the benefits available to your specific company and industry so you can ask the right questions. Don’t hesitate to utilize programs and opportunities to help reduce the final tax amount owed.
Adjust Services and Inventory to Meet Immediate Needs
When you learn how to adjust your business to meet and consumer needs, your business will be ready for anything!
During COVID-19, many small businesses found they needed to adjust how they offered their services while diversifying what they sold to meet the immediate needs of their clients. Staying flexible with how you offer services and adapting your inventory management practices are strategies that can help you grow your small business even after unexpected disruptions occur.
Identify Unnecessary Debt and Prioritize Reducing It
Debt management is a sign of a healthy business and dramatically impacts your ability to leverage debt in the future. Are you prioritizing your business debt? If you’re not, you should be!
One of your top goals should be to prioritize and reduce debt. Just as you would put money aside for taxes, you should be regularly making payments to work off debts – be sure to include these set payments in your budgeting plan.
Pay Out Your Own Salary on a Pre-Set Schedule
If, at any point, you plan to consider taking on investors or debt in order to grow your business, you will need to provide flawless financial statements. How you handle business profits and your personal salary are a part of that equation.
Paying yourself a set salary is an incredible money-saving habit that only half of small business report doing. Just as you would pay an employee, you should pay yourself a fixed salary on a pre-set schedule. This not only maximizes predictability of your business and personal cash flow, it’s a fundamental practice of any mature company.
How this happens can be done in a manner that makes the most sense for you and your small business. The goal is to view your business profit and your own pay as two separate items.
Get Creative With Free Marketing Tools Available
The implementation of a successful marketing campaign can boost the success of your business. Whether your small business is doing financially well or has fallen on hard times, marketing should be a priority.
Traditional marketing can be pricey for a small business, and you should be taking advantage of the free marketing tools available to you. Social media platforms are a great way to find and connect with your customers without having to spend money.
Through these platforms, you can create posts that are engaging and informative. You can also use location and audience tools to reach potential customers and clients. The philosophy of working smarter and not harder is the key to create this money-saving habit with your marketing.
Utilize Invoice Technology to Improve Efficiency
Traditional invoicing can get messy, be difficult to keep track of, and has limitations on customer interactions. Not all invoicing is created equal, and using the right invoicing app can help you track customer payment and manage data reports.
Invoicing software, like InvoiceASAP, can improve payment efficiency and customer retainment. Invoicing software enhances business operations, saving you time and money.
Manage Your Small Business with InvoiceASAP
The most important thing you can do for your small business is to utilize InvoiceASAP’s affordable accounting and invoicing software, featuring valuable auto-generated reports. These reports will help you master many of the aforementioned top money habits to help you manage your business.
Sign up for a FREE account today and discover how the InvoiceASAP platform can help your small business build smart money habits with data-driven insights.