Financial Management: 9 Tips for Business Owners

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“Dammit, Jim! I'm a doctor, not an accountant!” is a retooling of Dr. Leonard McCoy's famed Star Trek catchphrase, and it could be quipped by virtually any small business owner. Whether you're a designer with a boutique, a chef with a restaurant, a doctor with a clinic or any other type of budding entrepreneur, learning the basics of accounting and financial management are essential if you want your business to thrive.

Luckily, there are financial management tips that have worked through the years and across multiple industries.

financial management

9 Financial Management Tips that have Stood the Test of Time:

1. Realistic Budgeting

A realistic budget is almost as important as your business plan itself. A few hundred or thousand dollars here or there adds up, and if you haven't accounted for those expenditures, your working capital can quickly run dry. Go into spending with your eyes wide open – know what your fixed costs are (payroll, rent, utilities) and keep your variable costs (production supplies, commissions, travel expenditures) as reasonably low as possible.

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2. Separate Personal and Business Finances

While it may be easy to muddle together personal and business finances, it should be avoided at all costs. Even if you're spending from the same account, record the transactions separately. This ensures that if you need business financial records to apply for a loan or entice an investor, the details you want are easily accessible. Additionally, it saves money by ensuring that you don't overlook claiming a business expense on your tax return because it was buried in your personal records.

3. Organization

Separating your personal and business finances is just the first step. All of your business' finances need to be well organized. You should know where your invoices, credit card statements and other financial documents are; even the records tracking your inventory supply and payroll projections should be organized and complete. If needed, you can leverage these records to take out loans against your inventory or to fund your payroll.

4. Wise Use of Credit

Whether you are borrowing against your inventory, taking out a line of credit or accepting capital from a silent partner, utilize credit wisely. Are the funds helping your business grow? Do the interest rate and terms promote repayment or will the loan lock your business into debt? Do a risk-reward analysis on every type of debt your business incurs and use debt strategically to grow your business.

financial management

5. Tracking Direction

Well-organized financial documents help you see where your business is going compared to where it's been. Track your growth, losses, successes and failures so that you always have a sense of how your business is doing. In particular, use financial records to assess what's working, what you need to change and where you need to focus as you project your future revenue, expenses and cash flow.

6. Tight Accounts Receivables Management

When you're focusing on your core business, and especially when it's growing, it can become tempting to overlook accounts receivables management. However, if you get overly comfortable with the idea that clients will pay sooner or later, your net 30 accounts receivables can easily grow to net 60 or 90. That stymies your cash flow and makes it hard to maintain your budget. Don't set the precedent of loosening your AR management. Instead, stay on top of accounts receivables and keep the turnaround time as consistent as possible – that makes financial planning across the board easier.

7. Tempered Staffing Growth

Hiring staff and bringing on new people who share your vision and help shoulder the work is exciting, but you have to account for salary costs as well as indirect costs (office supplies, extra utilities, payroll taxes, benefit expectations, etc.). Ultimately, if you cannot sustain these costs, you may have to let someone go, which is arguably one of the worst experiences of being a boss.

Temper your staff growth. Don't hire people until you know you have a sustainable, long-term position for them. If you need help, outsource some processes, reach out to the gig economy or hire a consultant.

8. Rainy Day Funds

Even with the most careful financial plan, unexpected expenses can pop up. To prevent a patch of turbulence from debilitating your business, have a rainy day fund in place. This could be cash savings, access to a line of credit or even well-organized documents that boost your ability to access emergency financing.

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9. Risk Management

Use your imagination as well as stories from others in your industry to assess your level of risk in various situations. What will you do if your computers crash? If your data is breached? If your supply chain fails? If your manager quits? If there's a robbery? Identifying, analyzing and planning for relevant risks in your industry is both quality financial and business management.

Regardless what your business does, it cannot succeed without the right financial management tactics. Track every dime that comes in the door, have a purpose for it and know where it's going. Proper financial management is a cornerstone to any business's success, but simply knowing the basics outlined above can go a long way to helping your endeavor thrive.


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Updated: 12/26/2016

Jess Harris
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Jess Harris

Head of Content at Kabbage
Jess Harris, Head of Social Media & Content Marketing at Kabbage, Inc., has been helping small brands and startups expand their brand presence online for the last 8 years. Jess particularly loves helping small businesses start from scratch, using actionable insights to build a solid digital media strategy.
Jess Harris
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17 comments

  1. I think you’re right! If you’re organized and practical when you’re budgeting, it will really help you keep track of your money and where, exactly, it is going. Nice pointers! Thanks so much for the advice!

  2. # 3 is very important! I never quite think of # 9 Risk Management, it seems really important. You really need to have some backup plans. Thanks for the tips, I’ll keep them in mind for my business success.

  3. Thanks for sharing this informative article. I definitely think as a business owner that you have to be organized. Showing up to your accountants office with a shoe box full of expenses and invoices is a recipe for disaster. I’ve seen this happen all too often and unfortunately a lot of times these businesses don’t last.

  4. Hello Jess Harris. Thank you for showing up here and sharing your own findings. It sounds as if you have already made some very sensible investment decisions that I don’t doubt will reap you benefits in the long run. I’m pleased that you could relate it to your own experience and have already made steps towards investing in your business.

    I now feel I have a much clearer map for my path!!
    Great post.

  5. Hii
    Great post!
    All financial management tips are very helpful in order to become a successful business owner.It is absolutely true that if you want to start a business you should have a great knowledge of financial management.The capital is always the big issue.So many companies offer great deals for funds on your business venture.

    Thanks, for sharing this valuable information with us.

  6. Very useful tips for the business owner. Most of the time, business owners fall down their business due to lack to good tips, good suggestion. In this way, Jess, you did a good job by posting these helpful tips. Now business owner will be benefited by following these tips; I think so.

  7. Hi Jess, nice share. I think without the right financial management tactics, it’s almost impossible to manage a business. Simple basics can be effective for business owners to manage their business properly.

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