7 Tips for Business Owners’ Financial Health
If you own a business, it’s not just your own finances that you have to contend with. You also have to maintain the financial health of your company, too. It’s not easy to juggle both.
We have curated seven tips to help you improve your financial health. Consider this your ultimate guide to financial success.
Why Managing Financial Health Is Important 🤔
Money is the backbone of any business. As inflation rises, companies must navigate the potential impacts on their revenue. According to the Financial Health Network, the percentage of people considered financially healthy decreased in 2022 to just 31%. Now is the right time to get on top of your finances.
Source: Financial Health NetworkManaging your money well has several benefits:
- Allows you to make effective use of resources
- Has a positive effect on your credit scores
- Helps you gain a competitive advantage
- Ensures you can prepare for long-term financial stability
1. Keep Track of Your Numbers 🔢
The first step to being financially healthy is to keep track of your numbers. You need to monitor expenses, revenue, payroll, and others. There are numerous ways to track your income and expenditure, ranging from simple spreadsheets to complex data analysis machines.
Every so often, check your expenses and revenue to measure the return on investment (ROI). That way, you can make smarter money decisions and prioritize expenses.
2. Separate Personal and Business Finances 💰
As a business owner, it might feel like your organization is your whole life. However, it’s wise to separate your personal and business finances. It means you can protect your personal assets if something happens to your business.
Have separate credit cards for your business and personal expenses. Managing everything separately is useful for keeping everything organized, including taxes and checks.
3. Fulfill Your Financial Obligations 🏦
It’s crucial to meet all your financial obligations. As a business owner, you need to pay IRS, utilities, and labor costs. Missing any of these payments has consequences, from fines to loss of staff.
Giving salaries to your employees is one of the highest priorities, so makes sure you have a budget to do so. Automating your invoices is a great way to stay on top of things.
💡 Top Tip: Your payroll costs should be below 15-30% of your gross revenue.
4. Reduce Your Expenses 📉
There are many reasons why new businesses fail. But did you know that the most common reason (for 38% of businesses) is that they run out of cash?
Source: CbinsightsSometimes we all purchase things we don’t really need, and this also applies to business owners. Try to think first before you buy new equipment or software. Maybe your equipment is still working efficiently or there is a free software you can use. List down the things that you want to upgrade or buy and identify which ones you urgently need and which ones you can buy next time. Only buy things that you really need. Prioritizing in this way can help you with long-term financial planning. When in doubt, ask yourself if this is a meaningful investment that will make a big difference.
5. Optimize Your Company's Workforce 🧑💻
Optimizing your workforce can help in many areas, not just financial health. By taking steps to increase productivity and employee engagement, you can achieve many benefits, including:
- Reduced overtime (and lower costs)
- Productive staff with a high output that benefits your revenue
- Happy staff with low churn rates, reducing the cost of hiring and training
Alongside staff, consider the non-human elements of your business, too. Can you invest in any products and services that will streamline your workflows? Affordable software like Tommy can help you stay on top of tasks and time-tracking, increasing efficiency without breaking the bank.
6. Prepare Cash Reserves 💵
It’s best to have a small fall-back cushion in case of an emergency. Ideally, you should have about six months’ worth of living expenses stashed away.
Aside from emergencies, you can use savings to improve your business, such as investing in hiring staff.
Set yourself a long-term goal for saving, and you will thank yourself later. It will prevent you from having to take out loans when you need cash.
7. Set Goals and Measure Results 📈
Setting financial goals is crucial if you want to succeed. You should have a plan in place for 1-10 years, reviewing it annually. Set specific goals such as selling a certain number of units or acquiring a certain number of clients.
You can only monitor your progress if your goals are actionable and measurable, so make sure you implement the SMART goals method. All goals should be:
With this in mind, you can work toward a financially secure future. Regularly monitor your progress to determine what’s working and what’s not. Even if you don’t meet your targets, you can learn useful data points that will inspire you and help you refocus.
Looking for Better Workplace Management? 🐕
It’s not just your physical and mental health that are important. Your financial health is important, too!
There are many ways for business owners to strive for financial health. Hopefully, the steps in this guide have given you something to work towards.
Why not start by streamlining your productivity and managing workflows? Tommy is on hand to help with exceptional time and attendance software to help you see what your workforce is up to.