Handling both personal and company finances is a challenging task for most small business owners. This comes as an unfortunate circumstance, especially considering the significance of proper financial management for the prosperity of any small business.
Therefore, business owners should be ready to acquaint themselves with essential skills that ensure the business runs profitably and has excellent financial health.
However, besides understanding the basic business principles like accounting, financial statements, and loan applications, business owners must embrace smart techniques in managing their finances.
Here are some important tips that will help you profitably run your business while staying on top of your personal finances.
1. Build an Emergency Fund
Your business is likely to highly reward you in the future if you have an emergency fund. This pool of liquid money set aside for unforeseen expenses will cover your household in case of a downturn fluctuation in your business' income.
For instance, if you lose your favorite client or even your business hits rock bottom, the emergency funds will help you to quickly stand on your feet compared to when you don't have one. Emergency funds could be the thin line between a small bump in your finances, or a huge disaster in your entire life.
2. Save For Retirement
While most businesses tend to channel most of their profits back to their business, it is also crucial to save for retirement. You might have high expectations in your business' future returns, but the assurance is not guaranteed.
If you haven't started saving for your retirement, it would be best to start saving now since it also diversifies your arrays of investment options.
3. Separate Business and Personal Cash
The same way you shouldn't dip into your emergency funds is the same way you should avoid spending the business's money for personal reasons. This ultimate form of discipline will ensure that your business does not suffer any cash flow problems caused by unnecessary and unplanned withdrawals.
Always remember that if your business's finances suffer, then your personal and your staff's finances are also at stake.
4. Manage Your Personal Credit
It is worth noting that most of the small businesses cannot run without credit no matter how much they try- it is like their bloodline. A strong personal credit report means your business qualifies for good loans with lower interests. The easiest way to manage your credit is by paying your bills on time- even if it means living on a budget or below your means.
Other insightful tips you can use to build a good credit score include:
- Keep your credit balances low
- Manage your debt
- Limit your applications for new credit cards
- Watch your credit report
5. Explore More Ways of Generating Income
The old tenet of "Don't put all your eggs in one basket" plays a huge role in ensuring that your finances are tip-top. Relying only on one source of income not only puts you on risk but also your business.
In the dynamic world today, things change extremely fast, and your business might not thrive in the future like it is doing now. Having a secondary source of income will boost your emergency funds and also put you on the radar for any unfortunate future circumstances.
6. Consult Experts About Your Finances
It is impossible to overemphasize the need to engage professionals to analyze your finances. Consulting an expert with a vast financial background will assist you in managing your finances and also helping you avoid getting into bad credit.
If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a free financial analysis.
Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs. You don’t have to struggle with high-interest credit card debt any longer.