As a small business owner, properly managing your finances should be top of your to-do list. It makes your business less likely to fail. I often tell my clients, when your finances are in order it sets you up to SCALE. I define SCALE as:
- Secure funding
- Carve out more profits
- Avoid bankruptcy
- Lower risk
- Establish your legacy
To set yourself up to SCALE, here are five (5) financial strategies to implement.
- Pay Yourself First
Many business owners focus on running the day-to-day operations of the business, pay all their employees, and often forget that they are an integral part of the business who should be compensated as well. As the business owner, your role is extremely vital to the growth and development of the business, and therefore, do not neglect to pay yourself. Not only should your business finances be in good shape, but your personal finances should be as well. Paying yourself is the first step to ensuring that your personal finances are in order. Do not disregard this step.
- Make Profit a Priority
Savings is vital in personal finances, and it is just as vital in your business. Profits are set aside in businesses to be used for many purposes such as a nest egg/reserve of 3-6 months of your business expenses; paying bonuses to the owner and/or employees; investing in a special marketing project; investing in a coach or strategic advisor who will help drive further growth in the business; pay down debt; or any combination of the above.
- Keep Proper Financial Records
Bookkeeping is not a luxury for businesses that are doing extremely well. Bookkeeping is a necessary activity that each and every business should engage in. As the business owner, you must ensure that time is set aside monthly to review, monitor, and analyze your books. This activity at the beginning may be done by the business owner. However, so that you as the business owner can focus on other revenue-generating activities in the business, make it your goal to secure a bookkeeper for your business. Even with a bookkeeper, whether internal or external, never be hands-off with your business finances. Always make sure that you are in the know as it relates to your business finances.
- Invest In the Growth of the Business
Babies need nourishing foods to grow and as they grow into adults, the nutrition needed does not stop. Likewise, your business at every stage needs nourishment through financing. When growth opportunities arise, it’s important to have access to financing to take advantage of these opportunities. Also, as you set goals for your business and its growth, be sure to also create the opportunities that will support those future aspirations you have. Investing in an employee who will help drive increased revenue in the business, for example, is crucial. Many business owners think they will wait until the business grows to hire when in fact, hiring is what will allow them to grow.
- Document Your Financial Policies & Procedures
As you implement financial policies and procedures in your business, it is vital that you capture them in a financial policies and procedures manual. These will serve as instructions that outline what your employees must do to abide by these policies. The earlier you begin this process, the more time you will save yourself in the long run by avoiding having to repeat yourself every time a new employee comes on board. It also helps to eliminate costly mistakes for the company when you have directives clearly documented.
If you want to SCALE in 2022, implement these five (5) steps in your business. Managing the finances of your business can be a daunting task, especially if you do not a financial background, however, remember that as the business owner, you do not have to be Jack or Jill of all trades. You can hire the right team that would prevent you from slipping into back financial habits that would hurt your business in the long run. Teamwork makes the dream work. ERJ Services (Tax, Accounting, & Advisory) is ready to be part of your team.