Running a small business comes with many unique challenges, and for many business owners, money management is at the top of the list. To help you keep your financial ducks in a row, we’ve compiled the top ten tips you need to know.

#1 Create a Budget

Budgeting may not be exciting, but it can go a long way in ensuring your business’s longevity and helping you reach your goals. Set a monthly budget, stick to it, and come back at the end of the month to make adjustments. When you know how much you can spend, the path to cutting costs and boosting your revenue becomes clearer.

Mistake to avoid: It pays to be realistic when it comes to budgeting. Too often, businesses overestimate sales, underestimate expenses, or both — quickly landing themselves in financial trouble. Stay prudent, and be sure to leverage previous years’ data to inform your decisions.

#2 Get Your Financial Documents in Order

There are a few key financial planning documents every small business owner should know. A balance sheet, cash flow statement, and income statement are all important for tracking and forecasting expenses, revenue, and your company’s growth.

Mistake to avoid: When preparing your statements, watch out for common mistakes, such as data entry, omission, and duplication errors. Inaccurate data can lead to costly misunderstandings of your business’s finances, so educating yourself on accounting and bookkeeping best practices is important, even if you’re working with an accounting professional.

#3 Plan for Taxes

Taxes aren’t a once-a-year event, but a year-round consideration. To avoid any surprises when tax season rolls around, make sure you stay on top of changing tax regulations, maintain organized records, and regularly review your tax accounts.

Mistake to avoid: As a small business owner, you can’t afford to overlook opportunities to reduce your tax liability. However, you don’t want to overdo your deductions and raise the possibility of a tax audit. To maximize your savings, consider consulting with a Certified Financial Planner to understand what you can and can’t deduct.

#4 Build Up Your Emergency Savings

Establishing a small business gives you the freedom of being your own boss, but it also adds more unpredictability to your finances. An emergency fund gives you the peace of mind that your business can weather different setbacks, from equipment damage and security breaches to personal emergencies and natural disasters.

Mistake to avoid: Experts generally recommend personal emergency funds should cover three months’ worth of expenses. When it comes to your business, you’ll likely need a larger cushion. A common rule of thumb is to regularly set aside as much money as possible until you’ve saved six months’ worth of operational expenses.

#5 Don’t Shy Away From Loans

We know that debt can be scary, especially during the early stages of your business. However, scary doesn’t mean bad for business. When used wisely, loans can help your business tackle a variety of needs, from expansion costs to unexpected capital requirements.

Mistake to avoid: Hastily borrowing capital can do serious damage to your business. Make sure you understand why you need a loan and how you’ll use it. Will the capital support your growth, or will it just act as a Band-Aid? Is there another strategy for solving your current problem? If you decide to apply for a loan, take the time to choose the right one for your needs.

#6 Improve Your Inventory Management

Good inventory management can make or break small businesses that sell physical products. Without it, out of stocks and overstocks can quickly create financial inefficiencies, such as missed sales or unnecessary storage expenses.

Mistake to avoid: Don’t try to tackle everything by hand. An inventory management software can automate your tracking and give you actionable insights to help you make cost-savvy inventory decisions.

#7 Have an Airtight Cash Flow Strategy

Much of your focus goes toward profits and sales, but the cash you have on hand is another important factor in your small business’s success. Keep a close eye on your working capital by preparing regular cash flow statements and forecasts.

Mistake to avoid: One of the biggest cash flow management mistakes is ignoring late customer payments. To maintain a steady stream of cash, implement a billing strategy, such as offering early payment incentives, requiring partial payment upfront, or implementing late payment fees.

#8 Invest in Yourself

You likely want to put everything back into your small business, but paying yourself a consistent salary is critical for your own financial health. Pay yourself as you would any employee so your income isn’t entirely reliant on the success of your business.

Mistake to avoid: While you should certainly invest in yourself, don’t forget to invest in your business, too. Through careful cash flow management, you can dedicate funds toward strategies that will help your business grow, such as increasing service offerings and investing in employee career development.

#9 Keep Personal and Business Expenses Separate

Separating your business and personal funds is a crucial money management best practice. For one, tracking your funds for tax purposes is significantly easier when you have a clear record showing your business transactions. Your business’s credit history should also be separate from your own for the sake of your personal security.

Mistake to avoid: Don’t wait until you start bringing in revenue to open a bank account for your business. The sooner you create a dedicated space for your company’s money, the faster you can begin building company credit, and the easier it will be to monitor your business’s financial health.

#10 Work With a Financial Advisor

Whether you need support in reducing your taxes, executing IRA conversions, or anything in between, a financial advisor is there to help. The biggest value of financial advisors, however, is the objective, big-picture guidance they can offer. In addition to tackling the smaller details, they can help you define your financial goals, develop technical strategies, and find the best path to success.

Mistake to avoid: Don’t make one of these common mistakes when choosing your financial advisor. To get the most value out of your advisor-client relationship, take the time to find one that is qualified, tax-knowledgable, and a good fit for your goals.

Want more money management tips? Let Ironwood Wealth management help you tackle all of your small business planning needs. Reach out today to get started.Â