Keeping track of financials while running a business was challenging for most business owners during COVID-19. Government policies, mandates, reduced sales, and rising expenses took a toll on small businesses in the U.S. and throughout the rest of the world.
Now that the world is opening up, company owners have a chance to catch up on lost sales activity, set new goals, and create financial plans to protect their businesses. Here are some finance tips for small business owners that can help you financially grow your small business and create a new strategy to survive the next downturn:
1. Create a rock-solid financial plan
Consult with a professional accountant to develop a future-forward financial and risk management plan that includes long and short-term financial goals. You should also create a budget that takes business and personal financial objectives into account. Besides mitigating financial risk, an effective plan ensures you have extra capital to grow your business when conditions improve and emergency funds during economic downturns.
Not all businesses went under during COVID-19. Company owners with solid business budgets avoided cash flow problems and didn’t have to dip into their personal finances or retirement plans to stay afloat. And it doesn’t need to be complicated or restricting. Your financial advisor can help you create a strategy that ensures long-term financial health while still providing ample cash flow to keep your business running.
2. Cut expenses and reduce spending
Reducing expenses is a standard small business financial tip for good reasons. While cutting costs is never easy, it is one of the most effective ways to ease your financial burden and improve profitability.
In most cases, there are always costs in a business budget that can be eliminated or reduced. Typical expenses include unnecessary subscriptions, take-out meals, and expensive coffee-type drinks. Sometimes businesses lose track of these expenses because they are automatically charged to a business credit card and hidden under a long list of other charges.
Reducing expenses at all points in the business cycle is critical to long-term business health. By cutting costs when times are good, your bottom line can be improved during an economic downturn.
3. Upgrade your accounting software
One of the most effective financial strategies for long-term success is to embrace technology.
Are you still using connected spreadsheets with complex formulas that break? While you may think that this is saving money, the truth is that it may actually be costing more in the long term by wasting time, reducing productivity, and creating unnecessary time burdens on your accountant during tax time.
Modern financial software is easier to use and more economical than ever before. Besides simplifying how you manage your small business finances, the latest software also helps you track personal funds and stay on top of your budget.
Current software options also simplify daily cash flow management with dashboards that use real-time data, so you always know the current financial state of your business. Tax planning is also far easier when you use modern software. In addition, most options today integrate with sales, customer management, and other systems to reduce data entry and streamline business processes across departments.
4. Analyze your seasonal cash flow
One of the keys to successful small business accounting is to analyze your seasonal cash flow. This is absolutely essential when creating a strategy for your business because it reveals the ups and downs of the business cycle. Identify when your business does well, and when revenue is slow. That way, you can set business funds aside for when growth stagnates, so your business stays afloat during difficult times.
There are many ways to grow your small business - knowing your seasonal cash flow helps you determine when the timing is right.
5. Get additional funding
Expanding into new territory can be riskier in a post-COVID-19 environment. However, if you feel your business has the potential to grow, you may want to consider getting more funding from outside investors to expand your business.
Additional funding benefits your business in numerous ways. You can use it to invest in new equipment or expand your services. If your business is cyclical, you can use the additional capital to get through slow periods. Before applying for a business loan, seek assistance from a financial services professional to help you get your books in order. Ensure you can meet payment terms by factoring in additional loan expenses into your budget.
6. Think twice before diversifying
Some businesses fall victim to diversification. Expansion and growth may be exciting, but they also need to be sustainable. Focus on your current product line or service and maximize that part of your business before moving on. Invest profits into that area of your business until it has reached its maximum potential. That way, you’ll be prepared to diversify into new products and services with a larger customer base when the time is right.
Market research is also critical during the expansion stage. Consult with a finance professional to determine if the economic conditions are favorable. Professional help is essential to develop a financial plan that ensures core areas of your business are covered before expansion takes place.
7. Maintain a healthy work-life balance
This last tip is not finance-related, but it may be the most important advice of all. That’s because it’s essential to maintain a healthy work-life balance when growing a successful business. Putting in maximum effort in the beginning may be necessary to keep your business profitable, but that should not be a long-term practice.
Setting a schedule for workouts and social occasions is an effective way to ensure you have time for your personal life. Healthy habits like eating right and exercising are essential to developing energy, maintaining focus, and staying productive. When your mind and body function optimally, you can make better decisions, work harder, and achieve higher levels of success.
Protect your business from future events with a solid financial plan
Ascension CPA helps companies just like yours create solid strategies to survive economic downturns and grow when conditions are right. Our experts provide financial advice for small business owners that helps them achieve their goals at every stage of the business cycle.
Contact us for a complimentary consultation to learn more ways to financially grow your small business and secure your future.