Posted on Feb 27, 2018

Tools and Tips You Need for Managing Small Business Finances

According to an Infographic shared by Business Insider, 82 percent of small businesses that fail experience cash flow problems. And, according to CB Insights, the number two reason entrepreneurs fail is because they run out of funding since they often mismanage or don’t manage their finances at all.  

As a small business owner, it’s necessary to manage your finances well, especially in the early stages when you’re trying to become established. Below are some tools and tips that will help you better manage your small business’s finances, so you can continue to scale and remain profitable for years to come.


You’ll want all the financial tools listed below if you plan on scaling your business, establishing a top-tier credit score for your business, dabbling in joint ventures or partnerships, applying for government contracts or loans, securing reasonable insurance premiums, acquiring more customers, and remaining profitable in the future.


Accounting Software

Keeping your small business accounting finances organized and up-to-date manually isn’t easy, especially if you don’t have a financial professional on staff. Instead, rely on accounting software to continuously calculate your net income and keep track of your revenue. With the right accounting software, you’ll be able to send automated and customized invoices, and track your expenses by linking your checking, savings, and credit card accounts to your dashboard. Additionally, you’ll be able to separate all your revenue streams, vendors, products and services, and more.

You will even be able to automate payments for bills, track billable hours, travel expenses, and mileage, as well as upload images of the receipts you’ll need to keep on file for tax season. You’ll essentially be able to keep all your income streams separate from the expenses you can write off come tax season, while being able to view them side-by-side so you can determine your net income. Here are some popular accounting software options for small business owners:


Financial Analysis

Most accounting software will provide you with a basic overview of profit and loss and your net income. Many of them even offer different types of reporting capabilities. However, you’ll want a financial analysis software to provide you with cash flow statements and balance sheets all in one place. Such tools will also provide you with real-time industry benchmarks and industry data comparisons, as well as your business’s expected value. And, they will provide analytics and insight into the profitability of your products and services, as well as documented risk assessments. Here are some popular financial analysis tools:



Plan for anticipated expenses and emergency expenses with a reliable budgeting software. Successful businesses of all sizes should create and stick to comprehensive budgets. They also make sure their budgets are scalable, and they implement the appropriate tools to determine their financial forecast and the best financial models for their business. Here are some popular budgeting tools:


Payroll Management

If you have employees or contractors, you’ll want to make sure you’re complying with state and federal laws when you pay them. Otherwise, you could be subjected to hefty fines or even be forced to close your business. Find a payroll management and human resources tool that helps you confirm the identity of your employees and that integrates with your accounting and budgeting tools. You’ll want a tool that allows you to streamline payroll and keep track of employee expenses and benefits. Here are a few popular payroll management tools:


Payment Processing Systems

Your customers and vendors will expect to be able to pay their invoices and bills with credit cards online and on the business website you build. Customers who visit brick and mortar stores will also want to pay with credit cards and receive paperless receipts via email. Some individuals will even want to pay with cryptocurrencies like Bitcoin. Ensure you have a reliable and secure payment processing system that links to your other financial tools and accounting software. Here are some payment processing systems you’ll want to consider:


Inventory Management

If you sell products on your e-commerce website or in a brick and mortar retail store, you’ll want to keep track of all your inventory in real-time. Otherwise, you could be spending a lot more money on creating and developing products and processing returns than you are on selling products.

Inventory management tools should integrate with your enterprise resource planning (ERP) tools, asset management tools, point-of-sale (POS) systems, and other tools that handle transactions and product details. Here are some reliable tools for inventory management:



Unfortunately, having access to all the best tools mentioned above won’t ensure your small business’s financial success if you don’t know some accounting basics. Below are some financial tips to keep in mind as you manage your small business finances.


Know Your Financial Responsibilities

Before selling a single item or hiring your first employee or contractor, you must fully understand all your business’s financial responsibilities such as:

  • Sales tax requirements by state, when and where applicable.
  • Documentation, proof, and expense reporting required for filing state and federal taxes each year.
  • Invoices, income, and payments due to you and your business.
  • Operational and day-to-day expenses, including payroll and utilities, as well as travel-related expenses.
  • Loans and funding that must be repaid, especially lines of credit with interest.


Innovate Ways to Continually Increase Your Cashflow

As a business owner, you should continually look for ways that make it easier and more beneficial for customers to buy from you. So, if you don’t have easy payment systems and a robust business website that makes it easy to view and purchase your products, it’s time to utilize such systems and build the perfect website for your business. Always look for more efficient ways to collect payments and offer unique products, pricing, and experiences to your customers to increase your overall cashflow. You can do things like offer limited-time items, discounted items, and sales that keep customers coming back for more.     


Keep Your Accounts Separate

Always keep your personal accounts separate from your business accounts. You can do this easily by acquiring a business credit card for business-related purchases, and by opening a checking account for all your business-related transactions. If you don’t keep your personal and business-related transactions separated, you’re more liable to make costly and illegal accounting errors. And, it will be a nightmare when it’s time to pay employees or creditors, and especially when it’s time to file taxes.


Follow an Accounting and Financial Planning Schedule

To maintain the financial health of your business, keep and follow a strict accounting schedule. At least once a month you should ensure your business’s invoices, bills, employees, and contractors are all paid. And at least once a quarter, you should use your financial analysis software to help you make accurate financial projections and budgets. Bottom line, you’ll want to make sure your income is always exceeding your expenditures, and that you have a data-driven plan to steadily increase your profits and income streams. Set reminders on your calendars to make sure you follow this schedule, or you could lose out on more profitable opportunities.


Hire a Financial Professional

While most of the tools mentioned above will help you manage your small business finances, you maty want to consider consulting a financial professional at some point. At the very minimum, you’ll want to hire a financial professional the first few years you file taxes, and as you scale your operations, staff, and offerings. You may also want to consider having a CPA (Certified Public Accountant) on retainer who specializes in small business finances.

Managing your small business’s finances doesn’t have to be overly complicated in 2018. Use the tools and tips mentioned above to get started today and ensure you remain a competitive force for many years to come.


Feature image: Pixabay