Financial management is a pivotal part of every business. A business’s financial health directly dictates how it will operate. No matter how successful your business is, your financial situation should always be improving.
Optimizing your finances will set you up for a great second half of the year. Having a healthy reservoir of cash will allow you to be even more flexible as a business. Improving your business finances will open opportunities to help your business grow.
Not every business owner is going to be a financial expert, but that is okay. Following this guide will provide you with a starting point to improve your business.
1. Know About Your Current Financial Situation
The first step to improving your business’s financial situation is to know exactly what your situation is. It is impossible to know where you want your business to go if you do not know the current state of affairs.
An extremely important factor that will impact your business’s reputation, as well as your finances, is your business’s credit score. A business credit score is a numerical measure that different credit bureaus use to represent your risk level as a borrower. Just like with personal credit scores, the higher your score, the more trustworthy you are to a lender.
The first step to ensuring that your business is in a good situation financially is to check your business credit score. Again, like personal credit scores, business credit scores will differ slightly depending on the agency that you pull the report from. The three main credit bureaus for business credit are as follows:
- Dun & Bradstreet – Check your score for free. Be mindful that the free version only gives a snapshot of your credit report.
- Experian – Request a credit report today. Options range from a one-time report to a yearly subscription with unlimited access to your credit reports.
- Equifax – Request an Equifax report here. Just a warning, Equifax states that new business credit reports are currently unavailable until further notice.
A business’s credit score is everything when it comes to funding and reputation. If a business’s credit score is poor, they could lose out on opportunities for funding, grants, and certain vendors may not want to work with them.
2. Improve Your Business Credit Score
Knowing your business credit score is half the battle. Many businesses will likely have low credit, or hardly any credit if they were not aware of their score before. Improving your business credit score will take time, but it is doable.
The first step you take when trying to improve your credit score is to comb through your credit reports. Look for any outlying payment, credit hit, or mistake that may be on your credit report. If there are any outstanding issues on your report, call the reporting bureau right away to figure out the next steps.
If you check your report and there are no issues, that is great, but there is still work to be done. A multifaceted approach is the best way to improve your business credit score. Your next focus should be on your current credit-utilization ratio. Experts recommend that your business does not exceed 30%, but some believe that keeping your ratio under 10% is the new norm.
Getting your credit utilization ratio down will do wonders for your score and your financial situation, but you shouldn’t stop there. There are still ways for you to improve your credit score. Some other quick ways to better your credit score are:
- Pay your bills on time. The most obvious, but also the most important tip on this list, paying your bills on time is imperative if you want to improve your credit.
- Establish lines of credit with your suppliers. If you become close enough with a vendor they may allow you to establish a credit agreement with them. After you make your payments on time the vendor can report it to a credit bureau.
- Apply for a small business loan. Small business loans will improve your credit score if you make all your payments on time AND if the lender reports your payments to a credit bureau.
- Keep business and personal finances separate. A business expense should be purchased with the business credit card, not a personal card. In 2017, a Mastercard survey showed that 46% of business owners use personal credit cards for business purchases. Using your personal credit card will only impact your personal credit score, thus giving you no benefit to using it for business purchases. Utilizing and paying off a business card is just another way to show you’re a reliable borrower.
Improving your business credit score will unlock different financing opportunities and will increase the reputation of your business.
3. Utilize an Online Bookkeeping Platform
Small business owners are expected to be experts on every aspect of business, which is just not feasible. Thankfully, today, they do not need to be experts to excel at a task. With the advancement of business technology, business owners are better equipped to handle anything thrown their way.
Depending on the size of your business, hiring a dedicated bookkeeper or accountant may not be feasible. Online automated bookkeeping services have become increasingly popular among small business owners looking to keep their finances in order. Online bookkeeping platforms will streamline your finances without the bloated price tag.
Not all cloud accounting platforms will be the same. Certain software offerings will be geared towards enterprise businesses, while others will be intended for extremely small businesses. Our small business bookkeeping platform is perfect for businesses of any size. With a relatively easy learning curve, you can be balancing your books as early as today.
Some key features that we boast to make your accounting processes easier are:
- Receipt integration and tracking.
- View and organize all of your transactions in one place.
- Reconcile receipts with ease
- Simple integration with Gmail, MailChimp, Quickbooks, and more!
With an online bookkeeping service, you will never fret about your business accounting again.
4. Cut-Down on Unnecessary Costs
Cutting costs is never fun. As a business owner, you want to ensure that your employees have the tools to succeed, but that they also enjoy coming to work. Usually, you have to spend extra money in order to achieve both of these goals. Sadly, in the age of COVID-19, unnecessary spending must be moderated.
When cutting costs, do not think that you need to cut back on everything. Instead, just think of some areas where you can cut-back some spending.
Party and Pleasure Spending
Usually, the first thing that comes to mind when cutting spending is the fun stuff. If you are tight on funds, consider spending less on catered lunches, going out to eat, party supplies, and team building trips. While it will deliver a blow to team morale, it will help in the long run, financially.
Also, you do not need to be a “no-fun workplace”. You can still have fun parties and order food but perhaps do it less frequently. Instead of ordering food every Friday, maybe keep it to once a month.
A silver lining of COVID-19 has been that more businesses are seeing that remote work is a viable option. Moving to a fully remote workforce will come with its own obstacles, but it can help cut down on a huge expense. If you can move to either a smaller office or have no office, that would free up a large amount of money to use elsewhere in the company.
Cut Traditional Advertising & Marketing
As the world moves toward a more digital landscape, traditional advertising is dying. If you are still spending loads of money on billboards, local TV ads, print advertising, you could be spending that money elsewhere.
Sadly, traditional advertising is expensive and generally unnecessary, if you are strapped for cash. Cut down on your advertising budget, but make sure to keep up with your modern marketing efforts (Social media marketing, Affiliate Marketing, email marketing, etc.,)
Managing finances will never be fun or easy, but it is a necessary task for a business owner. Hopefully, your business has been operating comfortably, but with these tips, your finances will be even more in order.
If you have any more questions about our automated bookkeeping software, sign up for a free trial today!