3 Tips To Gear Up Your Small Business Financing In 2019
Financing is often one of the most challenging areas of running a small business– and also one of the most important. With proper financing and financial management in place, a small business will be more likely to survive tumultuous times and optimise their profitability during prosperous times.
To get on track financially in 2019, small businesses are encouraged to get back to basics and build a foundation for growth. Here are three tips for gearing up your small business financing in 2019.
Start Using Business Reports
Small businesses often forgo using traditional business reports because they can be time-consuming to put together. However, they provide valuable insights into what’s happening in a business. If you’re waiting until year end or tax season to understand your financial situations, you’re setting yourself up to fail.
Business reports can cover anything from promotions to expenses. Marketing reports cover data pertaining to web traffic, campaigns, and social media engagements to help lay the framework for future promotions (source: https://blog.waveapps.com/small-business-marketing/). Financial reports can help track expenses for assessment, profit and loss, cash flow, and sales revenue to help with forecasting and strategic decision making.
To start, choose one or two reports that you’ll use and get into the habit of presenting them. Once you become comfortable using those, add a few more. Follow the 15-5 rule when crafting reports; they should take no longer than fifteen minutes to put together and five minutes to read.
Be a Smart Borrower
If you plan on using loans– or currently have any in use– be a responsible borrower and ensure that the money is going to areas of the business that will show the greatest return on investment. Before you borrow money, set SMART goals and identify how much money you will need, and what it will be used for.
It’s also important to shop around when looking at financing options. Are you working with investors? What are their expectations? Are you looking for a bank loan instead? Take the time to compare and contrast the pros and cons of your options, understanding your rights as a borrower and your obligations for repayment. Beware of high-interest rates and never take more than you need.
It’s essential that you commit to making repayments on time, and prioritize your loans above other expenses. If a situation arises in which you can’t make a payment, let your lender know ahead of time and have a discussion about your options. This should be a one-off situation, not a frequent occurrence.
Divide Personal and Business Finances
Plenty of small business owners streamline their efforts by keeping one bank account for both personal and business needs. However, this often causes problems further down the road during tax season and subsequent audits. Failure to prove what counts as business income or personal expenses can result in hefty fines.
Keep personal and business finances in separate accounts, and keep records of everything that goes in and out of the business account. Even if you choose not to draw an official salary from the business, transfer your money between your accounts rather than paying for personal expenses directly from the business account. It’s a minor inconvenience today that will save you valuable time and money tomorrow.
Be Profitable in 2019
There are a lot of different things you can do to help with your small business financing in 2019, but focusing on the three tips listed here will get you off to a good start. After building this foundation, you’ll be able to start creating a savings fund and ensuring that you’re reinvesting in the business. When it comes to small business, the small details matter.