How Money Management Can Reduce Financial Stress In A Small Business
By Addisson Shaw
Running a small business is challenging for many reasons. But money management is perhaps the most prevalent of them all. With U.S BLS stats revealing that more than 82% of all SMEs fail due to poor cash flow, having a strong financial strategy is more crucial to success than ever before.
All too often, help for small businesses is hard to access, which is why sharing resources and information, especially for BIPOC entrepreneurs, women, LGBTQIA+ entrepreneurs, immigrants, veterans, entrepreneurs with disabilities, low-income entrepreneurs, and formerly incarcerated entrepreneurs is essential to ensuring our communities thrive.
But at the end of the day, small business support is important for everyone.
In this economy, we need to stick together and share tools where we can. That’s why we’ve highlighted some expert-approved tips for improving cash flow and money management in business that everyone can benefit from.
Utilize Financial Technology And Software
If you’re one of the millions of entrepreneurs struggling to cope with the pressures of money management and financial literacy, you’re not alone. Technology is on your side and there are software tools designed specifically to help with this problem.
Financial technology, accounting software, and other automation tools have been developed to support small businesses in the process of billing, balancing books, calculating monthly costs, collating data for projections and performing a wide variety of other finance-related management tasks. Some of the highest ranking options include:
- For micro or home-based businesses – Xero
- For service-based businesses – FreshBooks
- For freelance businesses – QuickBooks Self-Employed
- For those on a tight budget – Wave
These tools can all be found online, and are either free or have a sliding rates scale depending on the features required or the number of users. Different platforms offer different services, but there’s a wide variety of options to choose from, so every business benefits.
Build Good Business Credit
Growth may not be the main thing on your mind today. But in the future, being able to obtain business real estate or better insurance policies will be crucial for the success of your business.
Building up good credit is an important thing for all business types because it puts you in a stronger position to succeed once you’ve found a solid footing. To acquire good credit, you’ll need to pay off your debt on time and be realistic about any loans you take out, now or in the future.
There are many benefits to having good business credit, including protection of business (and personal) assets, staying ahead of the competition, and reducing financial stress by giving you access to financial support when you need it most. Remember: you’re playing the long game.
Monitor Your Books Closely
Keeping a close eye on your financial situation is absolutely imperative to not only reducing financial stress but also enabling your business to withstand the test of time. Additionally, it helps you to keep on top of tax matters and to ensure your filing is up to date.
Like so many things in life, when you understand your books, they will become less stress-inducing. By ignoring warning signs and staying in the dark, you not only jeopardize your business, but you also make it much harder to rectify the issues at hand.
Develop An Efficient Billing Strategy
In 2022 alone, more than 87% of businesses received late payments. They might not seem like more than a bothersome occurrence, but late payments can quickly derail your cash flow situation and cause a massive strain on your financial float. Therefore, an efficient billing system is essential.
- You can do this in several simple ways:
- Create clear payment terms on invoices
- Use automated billing software
- Set up penalty fees for late payments
- Offer discounts for early payments
Setting up a more streamlined billing system can dramatically improve financial help for small businesses. Don’t be afraid to set clear boundaries with the vendors and clients you work with. Your small business deserves to be paid well and on time, every time.
Don’t Be Afraid Of Loans
Although taking out a loan might seem like a scary prospect at times, doing so can make a huge difference to the stability of your business. Plus, if that’s what you need to grow your company and make bigger profits, it’s well worth the risk.
There are numerous lenders that offer financial assistance for small businesses with reasonable interest rates and repayment terms to encourage growth. Taking advantage of this and securing a loan can put you in a better position for attracting new clients, offering better services or products, or purchasing equipment that furthers your chances of success. In addition to this, paying off a loan will only increase your business’s credit rating.
Invest In Marketing And SEO
Obtaining SEO and social media help for your business is another great way to spread the word about your small business, increase sales, and generally promote financial growth. Brand marketing for small businesses is crucial for gaining visibility and going up against the competition.
You can start to do this by learning more about how small business SEO and marketing work, and hiring someone to focus on this element in a major way. The better your marketing is, the more customers you will attract, and the easier it will be for them to find you.
Take Care Of Your Mental Health
Being an entrepreneur or even an employee comes with its fair share of challenges. But that doesn’t mean you have to let them overwhelm you.
As we have seen today, there are many resources for small businesses available that can alleviate financial tension and help you get to a place where you feel in control of your fiscal affairs. There are also nonprofit organizations assisting small businesses that focus on providing mental health support and services. Remember to breathe and take care of yourself, too!
The Way Forward
Knowing how to grow a small business financially doesn’t happen overnight. Most entrepreneurs are driven by a vision that they are courageous enough to translate into the world, but sometimes it’s the daily operations, administrative obligations and logistical applications that create challenges.
But just like any skill, you get better with practice. In the meantime, use these tips to help reduce financial stress in your business.
In time, you can reduce monetary strain and create a more manageable and sustainable financial system that yields greater profits.
Need help with your small business? You can find free resources for small businesses on our resources page, or learn more about how to apply for our free legal, finance and marketing services on our Small Business Support page.