Keeping Finances in Check: 3 Crucial Steps towards a More Profitable Small Business

It’s not enough to simply open a business checking account online and hope your finances fall in line. Your financial strategy should be outlined in your business plan. You must include financial statements that show where your company is financially and where you want it to be in the future. This way, you can determine how much financing your business actually needs. Financial projections – profit and loss, balance sheet, and cash flow – also allow financiers to determine if lending/ investing in your company is a wise choice for them. Start by setting up a spreadsheet projecting sales over the course of at least three years.

After you’ve secured your start-up costs, keep a detailed list of all business expenses to make sure that you are well within your estimated budget. Overspending – even on little things, like office supplies – can lead to major gaps in your budget that you will need to account for. Little budget tweaks will surely occur down the road, with some expenses coming in higher or lower than you originally anticipated. Don’t panic just yet – as long as the total of your real expenses is close to your estimates, you’re on the right track to success. 

Besides learning how to keep your expenses within a budget, you must also struggle to save money for emergencies or bad economic climates. The number of your clients will fluctuate, and you have to make sure that you can cover your business costs, even when customers are hard to come by. Furthermore, you must have some money set aside in case something unexpected happens (for instance, you lose an important employee or a piece of your equipment breaks down). Even with insurance, every small business faces some inevitable risks. Having an emergency fund to cover you will allow you to avoid accumulating debt with every burden you encounter.

Luckily, there are many ways in which small businesses can save money, from looking for cheaper advertising, to outsourcing, or hiring temporary instead of full-time employees. For a few inspiring ideas, take a look here.

Despite developing healthy financial habits and saving up to weather adversity, sometimes securing a loan is the only option you have to consolidate your business and avoid going under. Learning how to present your company in the best light possible when approaching a financial institution can make all the difference in the world.

Start by creating a financial plan to ensure you can afford your monthly payments. Also, don’t hesitate to research lenders beforehand. It can be difficult to secure a loan from a national bank for a small business if that business hasn’t been profitable in a while. A good idea would be to also reach out to community banks or credit unions in your area. Schedule meetings with advisors from different financial institutions to get additional information about their services. These advisors can also help you gather the necessary documents you’ll need to apply for the loan.

Next, get ready to provide detailed information about your plan for the loan. Include proof on how you will spend the requested funds and how much you need to accomplish your goals. Present the lender with the plan you made to pay the loan back. These prep tactics will help you avoid common mistakes and look professional, determined, and disciplined. A financial institution will be more likely to loan you money after they determine you have a detailed plan for returning the funds.

It will be difficult to predict every possible financial scenario that may arise in the business. Nonetheless, if you have a clear strategy and are prepared in case emergency strikes, your small company has a fighting chance of success despite today’s tough small-business climate. Being financially responsible is imperative, though occasionally challenging. By both accounting for every penny and perpetually looking for small ways to save some cash, you will meet your initial milestones sooner than you might have hoped.