How to manage finances of a small business

Cash flow is defined as the total amount of money that moves into and out of your business over a specific period. It's essentially the lifeblood of your business, enabling an organization to function and grow. Therefore, any successful business will have a strong system in place to manage and monitor it. Below are the few things you will need to know beforehand:

Here are a few strategies to help you manage the cash flow correctly.

A cash flow statement and forecast are simple financial documents that give you a snapshot of your monthly flow of cash. They can help you keep a close eye of cash going in and out of your business. You can easily view this data with help of Enty finances panel, where all of the incomings and outgoing are conveniently unified in one place. The net cash flow feature provides insights into your company's financial snapshot by reflecting the difference between incoming and outgoing money. This allows you to analyze trends, identify patterns, and make data-driven decisions. The dashboard can be customized to display data for different time periods, providing you with a clear view of your business's financial performance.

Think carefully about the payment terms you offer to your customers. If granting extended payment terms impacts your cash flow, you may need to reconsider your terms or find ways to incentivize faster payment.

Ensure customers understand your payment terms from the outset. Make these terms clear and concise and provide them in writing to avoid any confusion or disputes down the line.

Consider conducting credit checks on new customers before agreeing to work with them. This can protect your business from cash flow issues caused by late or non-payments.

Getting to know the people who handle payments can help reduce the likelihood of payment delays. Making sure your invoices are sent to the right place and contain all the necessary details is a simple way to minimize potential delays.

To effectively manage your small business finances, it's essential to understand the key financial documents. These documents provide valuable insights into your business's financial health and help you make informed decisions when it comes to accounting.

The three main financial documents you should be familiar with are:

Understanding these financial documents will enable you to track your business's financial performance, identify areas for improvement, and make informed financial decisions.

Small business accounting involves several essential elements that can sometimes feel overwhelming. However, these tasks are crucial for keeping your business compliant and for generating valuable financial insights.

Now that we’ve talked about the key documents you might need, it’s time to learn about the accounting basics principles and rules. They are what can help business owners to maintain accurate financial records and ensure compliance with tax regulations.

Decide whether to use cash basis or accrual basis accounting. Cash basis accounting records revenue when it is received and expenses when they are paid. Accrual basis accounting records revenue when it is earned and expenses when they are incurred, regardless of when cash is exchanged.

Choose the accounting method that best suits your business's needs. Cash basis accounting is simpler but may not provide a complete picture of your business's financial performance. Accrual basis accounting is more complex but offers a more accurate representation of your business's financials.

One of the first steps in managing your small business finances is to separate your business and personal finances. While it may be tempting to use your personal accounts for business expenses, mixing the two can lead to complications.

By opening a separate business bank account, you can keep your business transactions separate and have a clear record of business-related expenses. This will make it easier to track your business finances, claim deductions, and provide documentation in case of an audit. If you need a place to view all of the bank account balances in a convenient way and real-time updates - Enty is your go-to.

Consider using accounting software to streamline your financial management processes. Accounting software allows you to track income and expenses, generate financial reports, and manage invoices and payments. Look for software that gives quick access, integration with your bank accounts, and customizable features to meet your business's specific needs.

Enty's Finances service offers easy bank account management for your small business. With one seamless control panel, you can link up to 1,500 international banks and access real-time information about your account balances and transactions. This eliminates the need to log into multiple bank accounts separately, saving you time and effort.

Moreover, you can select or unselect a specific account to get a precise picture of your business finances and even look for a specific transaction or add it manually if needed.

If you're not comfortable handling your business's accounting on your own, consider hiring an accounting professional. An accountant can help you set up your financial systems, ensure compliance with tax regulations, and provide valuable financial advice. They can also assist with tasks such as bookkeeping, tax planning, and financial forecasting.

Following accounting best practices will help you maintain accurate financial records, make informed financial decisions, and ensure compliance with tax regulations.

Proper tax planning and compliance are crucial for small businesses. Here are some tips to help you plan for and pay your business taxes:

By planning and preparing for your business taxes, you can avoid last-minute stress and ensure compliance with tax regulations.

Whether you need funds to start a new venture or expand your existing business, exploring small business loan options can provide the financial support you need.

There are a variety of finance options available to small businesses, including bank loans, crowdfunding, invoice financing, business credit cards, small business grants, venture capital, and more. Consider different scenarios carefully to find the best fit for your business's needs. Here are some key considerations:

Exploring small business loan options can provide the capital necessary to fuel your business's growth and support your financial goals.

As a small business owner, it's important to pay yourself a salary. While it may be tempting to reinvest all profits back into the business, paying yourself a regular salary has several benefits. It allows you to cover your personal expenses, build your savings, and ensure financial stability.

Consult with your accountant or do research to determine the best way to pay yourself, whether it's through a salary or a draw. Paying yourself, even a small amount, from the beginning will help you establish good financial habits and ensure that you have personal financial security.

Debt can be a useful tool for starting and growing your small business, but it's essential to manage it effectively to prevent it from spiraling out of control.

Having some savings set aside for unforeseen costs can help protect your business from cash flow issues.

If debt is becoming a problem, there may be areas where you can reduce spending without negatively affecting your business operations.

There may be simple ways to increase your revenue that you haven't considered. For example, offering an early payment discount to customers could boost your cashflow.

If you're repaying a business loan at a higher than current market interest rate, refinancing could help reduce your monthly repayments.

Negotiating discounts or more flexible payment terms with suppliers can help improve your cash flow.

A better credit score can help you access more affordable credit, which can be beneficial if you need to borrow money.

As we can see, managing the finances of a small business requires careful planning, attention to detail, and adherence to accounting best practices. By following the tips and strategies outlined in this guide, you can effectively manage your business finances, make informed financial decisions, and set your business on a path to success.

With Enty's Finances service, you can streamline your bank account management, gain insights into your financial health, and simplify transaction management. Start taking control of your small business finances today.