Small business owners today have to focus on more than finding clients and completing projects on time. It often feels like they have to be marketing strategists, tech experts, social media mavens, and a whole host of other things that might not be in their industry niche.
Financial planning is another task which not every small business owner may feel equipped for, but it’s absolutely critical to success. With money coming in and going out through multiple platforms and channels, you need a financial management system that can create order out of the chaos. We’ll look at the importance of financial management and offer some practical tips you can employ in your own small business.
How Financial Management Improves Revenue Streams
It’s easy to lose money when you don’t know where it’s going, so particularly if you’re starting a new business during the pandemic, you must have your finances in order. While you’re trying to figure out which vendor needs payment and keeping track of appointments, you’re wasting time and missing opportunities to generate more revenue.
In today’s complex business environment, companies need more than just an accounting system to keep their finances in order. You need a robust financial management strategy that’s designed to track your revenue streams and make the most of the money coming in.
Insightful financial management does more than just help you crunch numbers and compile reports. It provides you with an overview of the business itself so that you can make data-driven decisions that will affect your direction, growth, and bottom line.
What’s more, you’ll be able to:
- Invest in new technologies to streamline business processes
- Have a deeper understanding of the trends that drive business performance
- Identify new paths to profitability
- Make business growth an enterprise-wide collaboration
- Develop more profitable pricing and production strategies
To that end, we offer five essential finance management tips for online business owners.
Create An Efficient Billing System
It’s a simple fact of business that some customers always pay on time, while others are regularly behind schedule. Too many unpaid bills creates a ripple effect that puts you behind and affects your cash flow. This also impacts your own ability to pay bills on time, which could negatively impact your credit score.
Rather than wasting time and energy chasing after clients, look for invoicing software that comes with crucial features like customizable templates and automatic payment reminders so you can personalize invoices for different client types. For example, you could tailor how you bill chronically late but valuable customers, such as requiring a percentage upfront or billing in increments.
Put The Focus On Relationship-building
Too many business owners put all of their energy into generating leads. While these activities are important for bringing in new customers, the bulk of your revenue comes from your existing client base through up-selling and repeat business. They’re easier to sell because they already have a relationship with your company and they know your products, so when you expand product lines, you already have a built-in base of prospects.
You should nurture these important relationships by offering incentives such as discounts and customer loyalty programs, being active and available on social media, and providing the kind of personalized service that makes them feel valued.
These activities also allow you to improve your ROI by double-dipping your marketing efforts through offering customer referral bonuses, generating social proof, and creating brand ambassadors from among a base of happy, loyal customers.
Engage In Strategic Tax Planning
Some business owners like to just pay Uncle Sam up front and be done with it. This not only means tying up revenue unnecessarily, but you may be paying more than you need to by overlooking credits and neglecting other important tax planning strategies that could be saving you time and money.
Use tax preparation software to identify ways to reduce liabilities based on your actual revenue and account information. Also, rather than remitting taxes quarterly or yearly, you can make monthly payments and categorize them as expenses just as you would your power bill or office rent.
Invest In Technology
All of these activities and more can be streamlined by acquiring and deploying the right technologies. For one thing, choosing the right platform for your online business can make other business processes easier, including financial management.
As online marketer Gary Stevens of Hosting Canada makes note of, studies show that nearly half of people start their shopping on a marketplace (like Amazon or Ebay), and the right ecommerce platform will let you integrate with these popular marketplaces.
“When selling products you aren’t putting much effort in if you are only showcasing them on your website,” says Stevens. “48% of people start to research a product on marketplaces. That means that half the people out there are turning to Amazon, Ebay, or Etsy for a solution to their problem.”
Some platforms will also provide analytics and compile reports to help identify ways to cut expenses and optimize on-page SEO. What’s more, dedicated financial management platforms will provide further insight into ways that you can cut costs without impacting customer care.
Another good tech solution for small businesses is a customer management system, which can provide insight into customer preferences and buying histories so that you can serve them better and increase sales per client. Best of all, many of these platforms and activities can be accessed and coordinated through SaaS platforms. This will remove the need to purchase software and eliminate the expense of constant upgrades and licensing fees.
Don’t Forget To Pay Yourself
One mistake many small business owners make, especially during the startup phase, is neglecting to cut themselves a paycheck. Even if you compensate the rest of your staff and implement an automated payroll system, you often dip into the company account to take care of your personal expenses.
Just the simple act of keeping your business and personal expenses separate by paying yourself a salary will provide you with a more accurate view of where your business stands. It will also take some of the pressure off of you by making sure that your personal finances are in order so that you can put your energy into business growth.
Particularly during uncertain times, financial management is critical for business growth. Using our tips for keeping your finances straight will help you track and manage your money so you can focus on generating more of it.
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