Simplify Your Small Business Finances With These Tips
3 Effective Tips for Streamlining Small Business FinancesSimple, yet efficient small business finances are the foundation to any successful business model. As a small business owner, you do not need to be a financial expert to manage your company’s funds. However, there are basic tools and concepts that can be easily leveraged by professionals running a small business. To conduct successful small business finances, professionals need to take past numbers into account while balancing their company’s future strategy. Almost all small businesses can use bookkeeping software or accountants to their advantage when considering past financial success and shortcomings. Financial projections give small business owners a glimpse into the future. During a #BizHackLive webinar, Mike Lingle, founder of Rocket Pro Forma and an expert in financial projections for startups, encouraged small business owners to use a variety of financial tools when planning their small business finances. To learn how you can implement these methods and software into your business’s financial planning, keep reading.
TL;DR: 3 Tips To Start Streamlining Your Small Business FinancesMany business owners hire accountants to do the numbers simply because they find them complicated or just downright confusing. But, as a small business owner, it is important for you to at least understand what goes into your small business finances.
- Master financial tools and templates like income statements, cash flow statements, and a balance sheet. These tools allow you to stay on top of your small business finances and help you leverage your financial projections.
- Monitor your company’s debt and try your best to avoid accumulating debt. While there are ways to pay off money that you owe, at the end of the day, any money you spend paying off debt is money that you didn’t invest in your business.
- Leverage well-organized financial templates as you do your own bookkeeping. These methods allow you to stay organized and have a full understanding of your small business’ finances.
Want more of these great insights? Subscribe to our community newsletter and get invited to #BizHackLive events. Don’t forget to follow BizHack on Facebook, Twitter, LinkedIn and subscribe to our YouTube channel.As you work to streamline your small business finances, there are several tools you can use to simplify the process. These tools for success include:
- Finance basics, the simple concepts behind each step of your small business financing process.
- A mental map of your business, a road map that gives you direction when analyzing your financial projections and setting long-term goals.
- Research skills that allow you to evaluate the current market and take into account how your competitors are operating.
- A great template, the tool that allows you to apply basic financial concepts to your small business and its current state. There are unique characteristics that your company brings to the table that should be considered!
Learning the Financial BasicsAs you begin to learn the basics of what goes into your small business finances, there are three critical tools you should understand. Income Statements, or a profit and loss (P&L) statement, use a basic formula to calculate your company’s profit. This formula is revenue – expenses = profit. However, this tool does not give you enough information to accurately assess your business’ profit, as it works on an accrual basis. Your income statement can be healthy, showing revenue coming in, but you are not able to collect it. There are several key performance indicators (KPIs) to monitor as you use your income statement. These metrics give you information on all of your transactions and intel on your company’s growth.
- The number of sales/subscribers /active users/$ Annual Recurring Revenue (ARR) or Monthly Recurring Revenue (MRR)
- FTEs, or Full-Time Equivalents (employees)
- Revenue per FTE
- Expenses per FTE
Why Do We Need Financial Projections?Financial projections are a tool you can use to gain insight into the future of your small business finances. There are numerous benefits to leveraging financial projections in your bookkeeping.
- You can run your business effectively and efficiently because you know what to expect in the coming months and can plan accordingly.
- You can plan and hire with confidence because you are well aware of how much you can afford to pay your team.
- You can handle problems that arise more smoothly if you understand the wiring of the business and where the money flows. Your financial projections make you better prepared to handle the unexpected!
- You can raise money to help your business grow because you have an in-depth understanding of your small business finances and can easily explain them to others.