To be successful, a small business must be careful in handling financial matters by avoiding common pitfalls. Sometimes an owner or manager may be tempted to take a casual approach to the budget or accounts receivable or payable by merging personal finances with those of the company. Another problem is when a small company is too generous with customers or employees. The following tips can help to keep business financials healthy.
Maintain Separate Company Accounts
No matter how small the business, financial accounts and records should be managed separately from personal accounts. Set up dedicated business checking accounts and savings accounts for the company to maintain transparency and to facilitate financial matters. The bank statements will be easier to monitor and reconcile as well along with tax preparation and filings. Don’t use company funds for personal expenditures unless they are business related, and keep clear, accurate records if you do.
Avoid Being Too Generous
You may think that giving away freebies or offering occasional free or greatly reduced services will help to build positive customer relationships. The problem is that customers may come to expect frequent gifts and discounts, which can not only hurt your business but also spread by word of mouth to affect your professional reputation. Other customers might expect similar discounts and complain about your company to others if you don’t provide them. Donate or reduce goods and services only within a marketing budget that introduces your company to the public in a fiscally responsible way.
Trim the Fat
Check the budget each month and streamline it every year to reduce unnecessary costs. Startup expenses like advertising to get your business noticed might be pared down as the public gets to know your company. You can also build an online presence through social media that is free, convenient, and spreads rapidly. Avoid using the company budget for meals and entertainment except as allowed by state and federal tax guidelines. If you plan to give employees or customers holiday gifts, look for low-priced items that are still enjoyable and effective.
Promote Within
When possible, promote current, qualified employees to higher-level positions instead of hiring outside applicants. Insiders already know the company as well as the working environment and can quickly adapt with possibly less training than a new person would need. This can save training costs as well as improve production more quickly in that position.
Simple adjustments like these can help your company remain financially stable. Keep an eye on your budget to maintain or reduce operating costs while increasing profitability.