If you are going to be running a small business effectively, you’re going to have to multitask many different roles. Chief Financial Officer, Marketing Director and Operations Manager rolled into one. Finances are crucial for a company’s structure and business development. Managing your finances smartly will prepare your company for changes in the market and for further investment. Serial entrepreneur Sebastian Greenwood has quoted Barbara Vrancik who says, ‘The most important thing in a business is liquidity,’ to make his point about significance of finances. Greenwood has few checklists for small businesses.
- No mixing personal & professional:Keep your personal account different from the business account. You may own the company, but it is also a separate entity, so treat it as such. The income and expenses from the business account are not your household expenses. So, do not make the mistake of starting your company with your personal account and then splitting it into another account at a later date. In addition, if there are anomalies in the account, it would appear reflect badly on you as you could be accused of being venal.
- Cloud computing accounting software: With the digital accounting software is a necessity as it gives you instant access no matter where you are. You can also quickly track, access data and update your stock at any convenient time. This beats the traditional method of accounting which is expensive and time-consuming. Accounting software gives you exhaustive insights empowering you to make informed decisions about cost cuts and investments:
- Budgets and investments: In view of the earlier point, investments are necessary for growth and budgets enable growth. Cutting down extra expenses is wise decision, but do it after a careful review. Short term cuts should not hamper long term goals. Inversely, if you are making profits, split it in such a way, that you can infuse some back into the company, make a few wise investments and give bonuses to your employees. Sebastian Greenwood likes to quoteWarren Buffet ‘Do not save what is left after spending, but spend what is left after saving.’ Be generous when you can and be stingy when you must!
- Contingency fund: If you are hit by recession or slowdown in the business, then you need to dip into your contingency funds to keep the business going. These funds should be either your savings or planned investments which can be liquidated quickly during emergencies. Alternatively, if you are battling a crisis, this fund can help you fund those expensive lawyers and compensations. In addition, if are neck deep in debts, this fund can be your saving grace. Not having a contingency fund is like signing your own death warrant!
- Go paperless:Since you are running a small set up, you can easily transit into paperless without any hassles. You are setting the precedent for when you company becomes big, and you will not have hassle yourself with this well-established process. Going paperless is also an effective cost cutting technique and it is a great way of doing your bit to ensuring a green environment.