Managing a small business is an exciting time, especially in the early stages. There’s a lot you’ll be handling each day, and you’ll be doing everything you can to grow as a business, while still providing great service to customers.
One particularly important aspect of running a small business is how you can effectively handle your finances, cashflow and payments. Better understanding of your business’s finances can also play a key part in helping your business grow and expand too. With that in mind, how do you manage your business’s income and payments?
Creating thorough forecasts
For some small businesses, cash flow can sometimes wax and wane throughout the year. You might already be doing great overall and making an annual profit, which will certainly be reassuring to any small business owner. Peak trading periods, such as Christmas, for example, can also be really helpful when it comes to turning a profit as a business.
The issue that some small businesses face isn’t a lack of overall profitability, but the inability to effectively cover dips in custom throughout the year. For example, a business that is doing really well for 6 months or so might not be prepared for a sudden drop in revenue the next month.
This can be disheartening and stressful for small business owners. To better handle periods like this, it’s important that you have a really clear idea of your business’s projected finances throughout the year. Put together thorough forecasts which can help you identify possible dips in business. You’re then in a better position to prepare for instances like this, such as by putting aside cash to cover wages and important bills, for example.
Keeping up with admin
It’s important to have a good grasp of your finances in a small business. In the early days especially, margins can be fairly tight, and there may not be as much room for unexpected costs as you’d like.
Make sure you devote time to organising and updating your business admin each day. This might be things like filing away invoices and receipts, tallying up weekly income and expenditure, or paying necessary bills.
By always making time to review the state of your admin, you can get a really clear image of how well your business is doing and plainly see what cash comes in and out of your business. It might also help you spot spare cash that you can set aside as an emergency fund.
Following up payments effectively
Many kinds of businesses, such as ecommerce companies, will take a customer’s payment directly at the point of sale or checkout. This can be really useful to small businesses, as it gives you near instant access to the income from that sale, which you can then track and file in your accounting software, for example.
However, other kinds of businesses might operate on an invoice basis instead. Customers might receive a service or product and be expected to pay at the end of the month or after 30 days.
One of the risks associated with this kind of business is that customers pay off their invoices late, or only pay after you’ve spent time and effort chasing them to pay what’s due. This can really affect the consistency of a small business’s cashflow, where a lack of income can be particularly damaging.
This is why managing your invoices well can be so important. Firstly, you should make sure to invoice clients at the moment a sale is made. This invoice should prominently feature the date of expected repayment. By keeping the sale fresh in a customer’s mind, it’s more likely that they will pay in due course.
However, it’s important to be proactive in the case that they don’t pay. Perhaps consider a 48 hour grace period, after which you start chasing up customers who haven’t paid.
For some customers, they may pay soon after you chase them. For others, it may take a little longer. It can be tedious chasing up payment, but it’s still a crucial business responsibility to ensure consistent cashflow.
Helping your business with your accounting and invoicing
Small business owners have a wide range of duties and responsibilities to handle in each and every day. When you’re focussing on growing and expanding your business, it can sometimes be hard to find time to handle admin and chase up payments.
This is where TradeFit’s accountancy software management service can help you. Our professional service can handle all your business’s accounting and admin duties, which lets you focus your time and effort on guiding your business to further growth. To find out more about this service, take a look at our accountancy software management page or contact us to talk to a member of our team.
Alternatively, you can request a free 14-day trial to experience our customer support services for yourself and see how it can help your business.