Smart money management is important for any business, no matter how long it is has been in operation. But, it is particularly crucial in the early stages of a business. You may be working with limited capital, and a steady flow of clients and cash has yet to materialize. Poor choices now can hinder growth, or even worse, lead to complete failure. Here are just a few tips to get things off on the right foot, financially speaking.
Ruthlessly Vet Purchases and Expenses
This is not the time to just be spending money on any old thing. Sure, there are certain expenses that are necessary to get your business up and running, and you don’t want to skimp on anything that would potentially compromise the smooth running of your operation, your good and services or customer satisfaction But, many new business owners fall into the trap of thinking certain things are necessary that really aren’t, when that money could be better spent elsewhere, or sit nicely in a savings account.
So, be ruthless with determining whether a certain purchase or expense is necessary right at this moment. If you absolutely can’t live without it, or it would offer some amazing benefit as far as freeing up time for other more important tasks, save it for later. Don’t rush to hire employees when independent contractors, or a one-off hire for a job as needed, will do the trick. If you can get away with working from home for now, don’t throw away money on renting office space. Do you absolutely need a certain piece of equipment right now? Do you need something new, or would used suffice? Would you be better off leasing something rather than purchasing it outright?
Choose Your Bank Carefully
Choosing a bank for your small business is not like choosing one for your personal accounts, where the main consideration is convenience of location. There are several things you want to keep in mind here to get the most out of your bank and minimize fees. First you want to consider exactly what services you will require from a bank and compare fees for each amongst potential candidates. What sort of services will you be using most?
Smaller, community-based banks may have a bit more leeway in lending money, and may consider various other factors besides a credit and other ‘hard data.’ Bigger banks have a wider range of services, but many smaller banks are increasingly upping their offerings. Rates will typically be lower at larger banks. Does the bank work with the Small Business Administration loan system? What sort of extras come with your account? Don’t just consider immediate needs, but what you may need a year or two down the line. Make sure the banker understands your business and industry.
Keep an Eye on Cash Flow
For many businesses, lack of revenue is often not their biggest issue, but rather, cash flow. Making sure you have the money you need when you need it is crucial to running your business optimally. The earlier you get a jump on keeping your eye on it, the better off you will be. Keep on top of invoices, and establish a set procedure for dealing with late payments. Dropping the ball here will lead to major problems. Try to coordinate vendor payments with your receivables so you will have that money to pay those bills. Hold onto cash for as long as possible rather than paying bills right away.