Whether we like it or not, finances are a necessary part of running a small business.
Here are some effective procedures that entrepreneurs can adopt to improve their own accounting practices.
1. Don’t procrastinate
One of the biggest mistakes new entrepreneurs make is that they put off their bookkeeping needs. If you aren’t financially-minded, programs such as Quickbooks can make small-business accounting seem completely unmanageable, especially if all you need to do is send out a few invoices and track a few expenses.
The problem is, of course, that if you put off your accounting work, it doesn’t go away. It just gets bigger, and eventually you’re going to be faced with an overwhelming mess that you’ll need to sort out. The bigger the mess, the more you’re likely to procrastinate.
Fortunately, though, small-business bookkeeping is actually very simple. If you break everything down into small categories — categorizing expenses, paying employees, sending invoices — the whole thing becomes much more manageable and the compulsion to put it off lessens.
2. Understand your seasonal cash flow
You need to know your sales cycles as well. If you’re a business-to-consumer retailer that sells $20 items, your sales cycle is likely fast enough that having a cash buffer on hand is less of a concern.
But if you’re a business-to-business company whose sales cycles last months, or even years, having extra capital in the bank can mean the difference between being able to weather the long periods before revenue from past sales manifests and having to fold early because your cash has dried up.
3. Focus on your core strengths
One common issue is that startup owners, particularly software-as-a-service providers, tend to believe that they need to create everything from scratch. If you’ve already got a coder on your team, it can be seriously tempting to have him or her build internal apps and products rather than investing in existing solutions.
The problem with this approach is that it wastes your time. It might save you a few pennies at the end of the day, but the cash you’ll save is peanuts compared to what it cost you to take a key employee away from those activities that drive revenue for your business. Instead, it’s far more cost-effective to work with existing providers and use the tools that they’ve already perfected, rather than trying to reinvent the wheel on your own.
4. If you have to work 80 hours a week, you’re not profitable
Too many startup entrepreneurs blow through the earliest stages of their company’s growth by putting all their time and energy into their businesses at the expense of their health and relationships. While that may be fine for short periods, this shouldn’t be a part of your long-term financial calculations. It’s simply not sustainable.
If your company is only in the black because you’re working yourself to the bone, your numbers are going to take a major turn once you scale back your workload — if you don’t collapse from exhaustion first, that is. Undervaluing the time you invest in your business hurts everyone involved.
5. Ask for discounts
If you’re seriously tight on available funds but you want to take advantage of existing solutions, try emailing the founder and asking for a discount. It won’t work in every case, but you’ll be surprised by how often you can get free stuff just by asking.
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