Operating a small business, especially if you have plans on expanding soon, could be challenging, especially when it comes to managing finances. But financial management is crucial to your entire operation so you need to know as much as you can to succeed. The start of the year is an ideal time to assess your financial plans and goals, so here are five simple financial resolutions to help ensure that your finances would be in good shape.
1. Learn from the previous year
All small business owners make mistakes—what’s important is how they address those mistakes. You could use a financial management system that will help you oversee your cash flow and business plans. Having this perspective will allow you to assess your choices.
Regardless of the reasons for your mistakes, assess them, learn from them, and then move on. Conversely, you should also evaluate the great things you’ve done the past year and take these with you into this new year.
2. Don’t underestimate negative cash flow
Negative cash flow could lead to serious financial issues, particularly for small businesses. Find out why you have negative cash flow and follow up with customers who don’t pay on time. Consider shorter payment terms or late penalty fees, credit control automation, or invoice factoring among others.
3. Set a realistic budget
You probably don’t have a budget yet if your business is fairly new or if you’ve just begun scaling up. However, once you have a general sense of what you need for an average month or so, it’s time that you set a budget that you could stick to plan for this year’s and next year’s finances. If you already have a budget that requires regular adjustments, review it and revise it for this year.
4. Set aside money for taxes
Tax planning is crucial for any business, big or small. In general, the particular kind of tax you need to pay would be dependent on your specific business. Ideally, you need to take this into account when planning your budget.
5. Make certain that your financial records are always up-to-date
Having updated accounts and financial records would give a clear idea of your financial status. You would know whether you need to make some changes now or stay where you are, so you could secure additional funding faster in case you need it.
Financial management, considering you have the proper tools and techniques, doesn’t have to be difficult. Done correctly and regularly, you can manage your finances as early as you can, and follow these resolutions.