7 Small Business Finance Tips to Save Money and Grow Your Company

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Are you a small business owner looking for ways to get the most from your budget? Finances can be a major concern as entrepreneurs strive to save money and increase profits. Fortunately, there are many simple yet effective tools available to help small businesses establish solid financial practices which can have long-term positive effects on the company's success. In this guide, we'll take a deeper look at seven finance tips designed specifically for small business owners that will help them create stability while saving money and propelling their businesses forward. Let’s dive in!

1. Understand Your Cash Flow - Track How Money is Coming In and Out of Your Business

Understanding your cash flow is one of the most important things you can do to keep your business financially healthy. By tracking how money is coming in and out of your business, you'll be able to make smart financial decisions by understanding when you need to save or pay off debt.

Cash flow can be broken down into two components:

• Inflow - Money coming into your business, such as revenue from sales, loans, or investments
• Outflow - Money leaving your business, such as payroll expenses, taxes, and other operating costs

Keeping a close eye on both inflows and outflows is key to understanding the financial health of your business. Once you understand how money is coming in and out of your business, you'll be able to create a budget that works for your business.

You can track your cash flow using software, spreadsheets, or even pen and paper. Whichever option you choose, make sure to update it regularly so you always have an accurate snapshot of the financial state of your business.

Related Reading: How to Increase Your Business' Cash Flow

If you're feeling overwhelmed by the task of tracking your cash flow, consider hiring a financial expert to help. A professional or team, like Bench Accounting, can provide valuable insight into how money is coming in and out of your business so you can make informed decisions about budgeting for success.

Lastly, don't forget to check in with yourself every once in a while to make sure you're sticking to your budget. Budgeting is about more than just numbers - it's also about developing healthy financial habits that will set you up for success. Make sure you take the time to reward yourself for staying on track and remind yourself why it's important to stick with your budget. With the right mindset, your business can be on its way to financial security. Download our business budget tracker to help you get started!

2. Implement a Budgeting System to Track Expenses and Income

Creating a budget helps you create an accurate picture of your business's financial health. You should track every income and expense to ensure that your business is running as efficiently as possible. To help you keep better track of your cash flow, consider implementing a budgeting system like QuickBooks or Freshbooks. This will allow you to easily review all incoming and outgoing transactions and ensure your budget is on track.

In addition to tracking expenses and income, a budgeting system can also help you plan for future expenses and save money. It allows you to set spending limits or goals so that you can stay within budget while still making progress towards your financial goals. You can also use the data to forecast how much cash flow you'll have in the future and plan for any potential issues.

Finally, a budgeting system can help you track key financial metrics so that you can make smart decisions about your business operations. You'll be able to identify trends and quickly address any areas of concern. Knowing exactly how much cash you have coming in and out of your business will also give you greater peace of mind when making financial decisions.

Related Reading: The Three Financial Statements You Need to Know

3. Have an Invoicing & Payments System

Having a reliable system for invoicing and collecting payments is essential for small business owners. This will help you make sure that you are getting paid on time and accurately, which is important to the success of your company. To set up an effective invoice and payment collection system, create an online invoicing platform like Melio.

These platforms will allow you to easily create, send, and track customer invoices. They also offer features like automated payment reminders and receipt tracking so you can stay on top of payments. And if you have recurring clients, most platforms provide the ability to set up automatic billing so that customers are billed on a regular basis without any manual intervention from you.

In addition to an invoicing platform, you may also want to consider setting up a payment gateway like Square or Stripe so that customers can pay online. This will make it easier for customers to pay and reduce the chance of late payments. Setting up multiple payment options is also helpful, as some customers may prefer one over the other.

4. Prepare for Cash Flow Obstacles

No matter how carefully you manage your finances, cash flow issues can still arise. By being aware of potential obstacles, you can take steps to minimize the impact on your business.

One common obstacle is late payments from customers. To prevent this issue, make sure to set up an effective invoicing and payment collection system as discussed above. It's also important to be proactive when it comes to collecting payments. Follow up on overdue invoices quickly and offer incentives to encourage customers to pay their bills on time.

Another potential cash flow obstacle is seasonal changes in demand. If your business has a seasonal revenue cycle, it's important to plan for the ebbs and flows of income throughout the year. Prepare extra funds so that you can make it through the slow periods, and make sure you have enough cash to cover any additional expenses during peak times.

You should also be mindful of the costs associated with running a business. These can include overhead expenses like rent, utilities, and payroll as well as unexpected expenses such as repairs or legal fees. To ensure that these costs don't strain your cash flow, create a budget that includes all necessary expenses and stick to it as much as possible.

Related Reading: Common Cash Flow Problems for Business Owners and How to Stay Ahead

5. Automate Recurring Financial Tasks 

Recurring financial tasks such as payroll, payment processing, and tax filing can be time-consuming and tedious. Automating these tasks will help make them more efficient and accurate so that you can focus on growing your business.

Payroll is one of the most important recurring financial tasks for any business. To automate this process, consider using a payroll software like Gusto or Intuit. These platforms will allow you to quickly and accurately calculate payroll taxes, generate pay stubs, and make direct deposits for your employees.

You should also explore automated payment solutions like Stripe or PayPal. These tools will let customers pay online using their credit cards or bank accounts so that payments can be processed more quickly and with less effort on your end.

Finally, consider automating the tax filing process. Tax software like TurboTax or H&R Block will help you calculate and file taxes accurately and on time so that you can avoid any penalties or fees due to late filings. With the right systems in place, you can ensure that your finances are well-managed and secure.

6. Improve Accuracy and Efficiency With Cloud-based Accounting Software

Using cloud-based accounting software like QuickBooks is a great way to improve the accuracy and efficiency of your financial operations. These platforms will allow you to track income, expenses, inventory, customer payments, taxes, payroll, and more in one centralized place. They also offer features like automated invoicing and payment reminders to help keep customers on track with their payments.

If you're not comfortable with managing your finances yourself, consider outsourcing bookkeeping to professionals like  Bench or Xendoo. These companies will handle all of your financial operations so that you can focus on running the other aspects of your business. They also provide helpful insights into key performance indicators and offer guidance for improving your cash flow.

7. Utilizing Loans or Credit to Stabilize Cash Flow During Difficult Times

During periods of financial strain, obtaining a loan or establishing a line of credit can be a viable strategy to help maintain a steady cash flow. Banks and other financial institutions offer various types of loans, such as small business loans, that can provide additional capital when revenue is low. Alternatively, a line of credit can be used as a flexible safety net, allowing you to borrow only the amount needed, and interest is typically charged only on the borrowed amount, not the entire credit line.

However, it's important to approach borrowing with caution. Thoroughly assess your business's financial standing and future projections to ensure you can manage the repayments without causing further financial strain. Professional financial advice can be beneficial in making such significant decisions. Remember that while loans and credit can provide a temporary solution, they are not a substitute for sustainable financial management practices.

8. Take Advantage of Tax Credits for Small Business Owners

There are several tax credits available to small businesses that can result in substantial savings each year. Partner with professional firms or accountants that can provide you with tailored advice and assistance in claiming these credits.

For instance, the Work Opportunity Tax Credit is available to employers who hire individuals from certain targeted groups who face significant barriers to employment. Similarly, the Small Business Health Care Tax Credit benefits businesses that offer health insurance to their employees, provided they meet specific criteria.

Research and Development (R&D) Tax Credits are another valuable resource for businesses engaged in qualifying research activities. This credit encourages companies to invest in innovations, which can significantly boost small businesses in technological or scientific industries.

The Employee Retention Credit (ERC) is a refundable tax credit designed to encourage businesses to keep employees on their payroll, especially during challenging times like the COVID-19 pandemic. The credit is based on payroll taxes rather than income. We've partnered with Addesso Capital to help you easily claim the ERC tax credit. 

There is also the Disabled Access Credit that supports businesses to make their facilities more accessible to disabled individuals. This credit can offset the cost of such improvements. Remember, these are just a few examples, and there could be other local or industry-specific tax credits applicable to your business. 

Grow Your Small Business With Fundid

Of course, these are just starting points to help you jump-start your small business finances and grow your company. If you are looking for more tips and tricks on managing your cash flow and growing your small business, we've got you covered! Subscribe to our weekly newsletter for the best tips and guidance on growing your business.