Running a small business as an entrepreneur isn’t easy, but it becomes much more manageable and rewarding with a solid money management plan. Your day-to-day operations should be more stable and you’ll be in a great position for future growth. Get started with these actionable tips.
Entrepreneurship and Money Management: Building a Solid Financial Foundation for Growth
Scrutinize Your Inventory
If your business sells goods, there are almost certainly some products more in demand than others. A good money management strategy is to identify the slow, medium and fast-selling products and prioritize them accordingly.
Jessica Spaulding — founder of the boutique treat company Harlem Chocolate Factory — examined her books to do just that. The results helped her put the most resources into producing the most-profitable offerings. This plan also caused a short-term overhead decrease because the shop didn’t make as many of the least popular flavors.
This approach also justifies spending more on certain ingredients or other essentials when the likely profitability warrants it. Supply chain fluctuations have made it more challenging to estimate production costs. However, it’s easier to feel confident about paying more than expected for something if it’s necessary for creating your most popular product.
Reviewing your inventory at least every few months makes good business sense from a money management perspective. It lets you become more aware of potential trends, such as specific products selling more rapidly in certain seasons.
Consider creating a pie chart or other graphical representation of your inventory. It will be easier to see if you need to make adjustments.
Scrutinize your inventory to identify the slow, medium and fast-selling products and prioritize them accordingly. #moneymanagement Click To TweetBecome Aware of Where Your Money Goes
Operating a small business usually requires wearing many hats. You may find yourself so busy that you overlook many key parts of your company’s financial health — such as verifying what you spend money on and why.
Besides digging into the specifics you spend money on monthly, it’s also wise to calculate what percentage of your overall income goes toward certain necessities. Perhaps you notice that your business spends too much on rent. You might have also recently realized that your company’s space is larger than you need. That gives you a great reason to consider downsizing the workspace.
Another option is to explore a shared hosting arrangement. It involves multiple companies using one server’s resources. The desire for better money management drives many small-business owners to consider this approach. It’s typically more cost-effective to share hosting needs.
However, before choosing this option, you should talk to your hosting provider and determine how easy it would be to scale up as your needs change. Inquire about different pricing plans and the cost differences between them. Knowing those details will help you prepare for future growth.
A closer look at spending patterns could reveal that you’re paying for rarely or never-used subscriptions you never got around to canceling. Consider splitting your expenses into things you must pay full price for and those for which you’d like to cut costs if possible.
Look at the things in the second group and investigate ways to save money. For example, could you save by signing up for an annually billed subscription rather than paying per month? Would a supplier give you a bulk discount for buying essential products in larger quantities? Determining those specifics could result in significant savings.
Look at spending patterns to see what you’re paying for. You may find a few rarely or never-used subscriptions you never got around to canceling. #moneymanagement Click To TweetPay More for the Things That Matter Most
Spending more to buy specific products when trying to get a better handle on money management may seem counterintuitive. However, it can pay off in the long run. That’s particularly true if you purchase high-quality equipment or other assets likely to last longer before needing repairs or replacement.
Make sure to keep the receipts when buying anything related to your business. That purchase documentation will prove helpful if you need to make a return. Plus, having them makes you more prepared in case of an audit. The IRS does not require retaining receipts for things less than $75, except for accommodation expenses, but you’ll need to show them if getting audited. That’s why it’s good to get into the habit now.
Whether you’re buying new computers or pieces of manufacturing equipment, take the time to conduct thorough research that helps you understand if you’ll get your money’s worth. Read reviews and learn how others in your industry use the products. Find out their results and how closely those outcomes mirror how you hope the items will help your company.
Pay attention to details about product support, guarantees and returns. Those will make you feel more confident if things don’t go as expected.
Know When to Outsource
Succeeding with money management may mean understanding which parts of your business are better for others to handle. Consider a situation where you spend several hours weekly on bookkeeping and must correct numerous things later. Your time could be much better spent in other business areas, and you should hire a professional bookkeeper.
You may initially find it hard to pass some duties onto others, especially if you love taking ownership of running the business and fear someone else won’t have the same devotion. However, you’ll probably become more open to the idea when you realize outsourcing has become a popular option for entrepreneurs. Giving some duties to others allows business owners to focus more on what they do best.
Even though outsourcing requires paying others, it can support money management. Imagine using the time previously spent on particularly challenging duties to boost your company’s profits and prepare it for future growth. Budgeting for those service providers could be well worth it because you’re making the money up elsewhere.
Always take the time to vet any third parties before hiring them. Find out what they can and cannot do for you, and ask whether they offer package deals that let you opt into several services for a lower price.
Succeeding with money management may mean understanding which parts of your business are better for others to handle. What can you outsource to free up your time for more revenue generating activities? Click To TweetBetter Money Management Is Within Your Control
Improving how you manage money as a small-business owner is not a skill you’ll develop overnight. However, applying these tips and other practical strategies will make it easier to control costs and raise your awareness of what drives profits and expenses. Then, you can pursue growth opportunities and keep your business competitive.
Ciao,
Miss Kemya
