If you’re struggling to manage your business finances, you’re not alone. Data shows that nearly half (42%) of small business owners admit to having limited or no financial literacy before starting their business.
For a small business owner, financial literacy often means harnessing a range of money skills—like budgeting, investing, accounting, and managing cash flow—to grow and succeed. As a new (or even not-so-new) business owner it’s easy to find yourself in over your head when it comes to the financial management of a business.
There are a wealth of tools and resources that can help strengthen your financial acumen and jumpstart your ability to more effectively manage cash flow year-round. Let’s break down how, in just 30 days, you can help set your business finances on the right track.
Week One: Conduct a full financial audit
Start your 30-day money challenge by conducting a thorough audit of your business finances. By reviewing income statements, balance sheets, and cash flow statements from the last 12 months, you’ll be in a better position to identify any cash flow anomalies and establish a stronger foundation for ongoing accounting processes. These documents, easily accessible with accounting software, will provide insight into expenses, assets, liabilities, and working capital and help you calculate key performance metrics like profit margins and operating cash flow. This audit will also help you identify a current financial baseline for your business, so you can establish an up-to-date profit & loss (P&L) statement. And if you think you might benefit from some help with the audit, some accounting software platforms can provide expert assistance.
Week Two: Implement a solid savings strategy and track your cash flow
Use week two as an opportunity to safeguard your business against potential drops in revenue throughout the year. As a general rule of thumb, a cash reserve should cover up to six months of operating expenses. With savings as part of your overall cash flow management strategy, you have the funds if an unforeseen circumstance comes along or to help finance business investments down the line. While putting aside that much cash may seem difficult, even just pinpointing exactly how much you need can help put saving goals into perspective and inspire you to prioritize saving.
To start a business cash reserve, consider setting up a monthly savings goal and treat your cash reserve as a non-negotiable fixed cost within your budget. Another step you can take is looking at where you can reduce your expenses. There are so many ways you can reduce spending, such as renegotiating your contracts with suppliers and delaying non-essential expenses.
Week Three: Identify new growth opportunities by diversifying revenue streams
How your business makes money is almost as important as how much money it makes. Focusing on diversifying your revenue streams can help enhance your resilience and growth. Are there new projects you can take on, new markets to sell your goods or services in, or new ways to sell such as recurring subscription services for customers? For example, have you considered offering an exclusive perk to subscribers or VIP customers to create a recurring revenue stream? Use this week to experiment with different approaches and understand the profits and losses of each. Online tools can provide insights and measure key performance metrics to help you keep track of what’s working and what streams you should prioritize.
Week Four: Ensure an integrated banking solution is part of your financial toolkit
For the final week, focus on evaluating your current business banking solutions. Consider how well your business bank is working for you. For example, does it integrate with the other financial technology you use to run your business effectively? Choosing a banking partner that syncs well with your financial management tools can help you automate some of your administrative tasks while improving real-time decision-making. A fully integrated system can enhance efficiency and streamline financial management. You should also consider a banking solution that supports long-term growth, such as real-time lending options, savings capabilities and a competitive annual percentage yield (APY) that can grow your reserves. Wrap up your 30-day money challenge by ensuring every part of your financial toolkit bolsters your financial goals and strategies.
As a small business owner, you shoulder many responsibilities, from maintaining sales and marketing plans, hiring vendors or employees, managing the business’s cash flow, and more. These tasks come with a price tag, and mastering your business’s finances will help ensure resilience and growth. Whenever you’re ready to jump in, plan to commit 30 days to learning and equipping new financial strategies and tools to set your small business on the right track.
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