A short guide to managing small business finances

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One of the most important things to get right when starting a small business is your finances, but if you’ve never had to organise invoices and pay taxes, this is easier said than done. Luckily, being aware of the financial challenges that come with starting a business is the first step to success, which is why this blog takes you through some top financial management tips on how to manage your money as an entrepreneur.

Lots of first-time small business owners worry about money because they don’t have a head for numbers, but even people who aren’t good at maths can get to grips with proper financial management with a bit of time and planning. No matter your current financial situation, the following list will help you to feel secure and confident in starting your new venture. Whether you’re preparing to set up shop or have already dipped your toe into trading, these are good habits to build for the future and will help your business to weather any storms that come your way.

Secure funding

Most startups need some kind of funding in their early stages, whether that’s a loan, grant or pot of savings. But choosing the wrong type of funding, to begin with, can really set you back or cause your business to collapse in the future. For example, taking out a large loan with a high-interest rate might mean that you can’t afford the repayments and end up spiralling into debt. While every business would like a grant to get them started, if you don’t manage to secure one, then choose your loan carefully.

Before applying for a loan or looking for investors, see what grants are available in your local area. The application process is likely to require a significant amount of commitment, but your small business could really benefit from money you don’t have to pay back. Remember that while traditional bank loans and government grants are the obvious routes to take, you shouldn’t rule out alternative forms of funding such as crowdsourcing online.

Get smart about accounting

Once you have the money you need to get set up and sales are starting to come in, it’s time to get smart about your bookkeeping process. This could involve hiring an accountant, but if you’re determined to give it a go by yourself, you’ll need to read up on tax laws and ensure you’re as organised as possible. Accounting involves more than just keeping track of how much money is in your bank account, so you’ll need to file away invoices and make a note of each transaction while calculating tax and VAT as you go.

Try to digitise your accounting processes as much as possible, as this will be easier to monitor than paper records, especially as your small business starts to grow. You’ll also have to pay your taxes online and, with most transactions taking place over the internet, it’s easier to have everything in one place. But effective accounting isn’t just about keeping your end in order, but about your clients too. Issuing customers with clear invoices on time will not only ensure that you’re receiving the money you need when you need it, but it will help clients to manage their own cash flow and understand exactly which services they’re paying for.

Track your cashflow

Not keeping an eye on cash flow is where a lot of small businesses fall down, particularly in their first year of trading. Unlike bigger businesses, you’ll have much less money to work with, so you’ll have less of a buffer if something doesn’t quite add up. One of the easiest ways to start monitoring cash flow is by having a calendar dedicated to income and outgoings. This way you’ll be able to clearly see when you need to buy new stock and when customer payments are coming in. It’s a good idea to predict when supplies are going to run out so they don’t take you by surprise. This will be good for both your production line and your finances, helping you to feel more confident and organised in your day-to-day processes.

Another of the top financial management tips that first-time business owners should observe closely is keeping their personal and business accounts separate. It’s easy to get mixed up when tracking cash flow if all your personal and business transactions are appearing in the same account. Try to set aside the money you need for personal bills at the start of the month, reducing the number of expenses you need to predict as the month goes on.

Finally, make sure you have a process for dealing with clients that routinely make late payments. This could involve giving them penalties for missing a payment deadline or pausing work on their project until they’ve paid their first instalment. Many small businesses require clients to pay a sum up front to help with managing their cash flow.


If you want your business to grow then investing the money you make back into your venture is going to be key. This doesn’t mean you need to upgrade every part of your setup, but it does mean optimising the way you currently work with new technology. It might mean that your profits don’t seem to be as high for quite some time, but in the long run, you’ll be able to deliver a better service to your customers. In the early stages of growth, investing your money into marketing can help you get the customers you need to boost your revenue.

Do I need an accountant to manage my small business finances?

Lots of small businesses are very successful at managing their money without the help of an accountant. There’s no reason why you can’t do your taxes, track your cash flow and grow your business without outside help. But if you’re struggling with getting started, you could ask for financial advice to get you off on the right foot. Just because you seek out an accountant at the beginning doesn’t mean you have to use their services every step of the way. They’re a great source of top financial management tips.

The post A short guide to managing small business finances appeared first on The Startup Magazine.

The Startup Magazine

Finance, Accounting, bank loan, Bookkeeping, business transactions, Cash flow, crowdsourcing, financial management, Government grant, Interest rate, invoices, payments, repayment, savings, small business finance, taxation

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