How to Manage Your Small Business Finances

The number one reason why small businesses fail is due to finances; now more than ever, it is important to manage your business financial resources and create longevity and success. I am particularly passionate about this topic because I have spent the last 13 years managing business finances and I understand first hand how important it is to the success of any business. 

I am sharing 4 tips from my experience on how to manage your business finances:

1. Review your Financial Statements

Reviewing your financial statements provides an intimate knowledge of your business and sets the framework to successfully manage your finances. There are three financial statements and each one has a unique purpose in your business. In order to be in control of your financial resources, you must become fully acquainted with these statements and understand what the numbers are saying about your business.

2. Create a Budget or Forecast

Your financial statements serve also as a baseline for creating your budget and forecast. When you determine the target for each spending category and establish a budget, it is imperative to do a monthly budget versus actual review. This helps you stay on track and make adjustments where necessary.

3. Manage cash flow

Cash flow is like a moving target so it has to be analyzed frequently. A simple Excel spreadsheet with your cash balances, revenue projections, and spending priorities is a great tool to help you stay proactive in managing your cash flow.

4. Savings

I think we can all agree that one of the reasons why we are in business is to create wealth; saving is the first step in achieving that goal. In addition to creating wealth, business savings come in handy for investment opportunities or during a crisis. Saving is a habit so start where you are and be consistent.

As you work through your finances, always remember, it is not about how much money you make but how well you manage what you make.