How to Streamline Small Business Finance Management

Managing finances is a major part of running a small business. Whether you are just starting out or have been in business for a while, effective financial management is crucial to ensure the success of your company.

Good financial management involves lots of planning, organizing, controlling, and monitoring of your business’s financial resources to achieve various operational goals. You should strive to make these elements as efficient as possible to keep your company in good financial health, reduce the risk of errors, and free up time to focus on growing the business.

In this article, we will discuss some tips to streamline small business finance management and make the process less daunting.

1. Automate invoicing and payments

Automation is the name of the game for many small businesses who wish to successfully streamline their finance management. With automated billing and invoicing, business owners and their staff can create and send invoices electronically using pre-made templates that are customized to include branding, payment terms, and other important information. Here’s a helpful guide on how to create and send invoices.

Create an invoice in Paymo based on completed tasks or hours worked

Once you create an invoice, the system can send it directly to the customer via email. Some software may also offer the option to send invoices by postal mail or through other electronic channels.

Automated billing works by allowing customers to make payments using electronic methods such as credit cards or bank transfers. Once the system receives a payment, it updates the business’s accounting records automatically, reducing the need for manual data entry.

Overall, automated invoicing and payments streamlines your business’s finance management in the following ways:

• It saves time. Automating your billing and payment system can save a lot of time for small businesses as opposed to manually creating and sending invoices to all your clients. Once you set up the templates, the system generates and issues invoices automatically, with minimal required input from you or your teams.
• More accurate financial records. An automated billing system can eliminate errors that sometimes occur when you create and process invoices manually.
• Faster payments. Automating the way your small business issues invoices can help you get paid faster; invoices get sent immediately, allowing the payment processing to be done by the client as soon as possible.
• Enhanced client satisfaction. Automated systems can not only send out invoices promptly, but can also provide clients with convenient payment options, improving their overall experience and strengthening trust in your business.

2. Hire a bookkeeper or accountant

Hiring a bookkeeper or professional accountant is a smart investment for small business owners who are struggling to manage their finances on their own. After all, these financial experts have specialized knowledge in managing financial records, preparing financial statements, and providing valuable financial advice.

Let’s say a small business owner operates a retail store and struggles to keep track of inventory and expenses. They may hire a bookkeeper to manage their financial records and prepare financial statements. The bookkeeper can keep track of inventory and expenses accurately and ensure that the financial records are up-to-date. This allows the business owner to focus on growing the business and serving their customers, while leaving the financial management to the bookkeeper.

Bookkeepers and accountants are trained to ensure accurate accounting and financial reporting, which can be challenging for small business owners who lack the expertise. They can keep track of expenses, income, and other financial transactions, ensuring that records are accurate and up-to-date. In addition, bookkeepers and accountants help small businesses stay compliant with tax laws and regulations, minimizing the risk of penalties or fines.

Continuing with the example of the retail store, the bookkeeper can also help the small business owner stay compliant with tax laws and regulations. For instance, the bookkeeper can advise on the correct filing of tax returns, ensure that the business is claiming all relevant tax deductions and credits, and provide guidance on tax planning strategies. This helps the business avoid legal troubles and ensures they’re able to use their resources effectively.

Beyond accuracy and compliance, bookkeepers and accountants provide relevant financial planning advice. They identify areas where small business owners can reduce costs, increase revenue, and improve cash flow. This kind of expert financial advice can often be instrumental in helping businesses achieve their financial goals.

Suppose the retail store owner wants to expand their business by opening a second location. The bookkeeper or accountant can advise on the financial implications of this decision, including the costs involved, the potential revenue streams, and the impact on cash flow. This kind of expert financial advice can be instrumental in helping the business achieve its financial goals.

3. Keep personal and business finances separate

One of the most significant financial management mistakes made by small business owners is mixing their personal and business finances. This misstep leads to confusion, inaccurate accounting, and tax problems; however, the solution is simple enough: establish separate bank accounts and credit cards for your business.

The most obvious reason to keep personal and business finances separate is that it allows business owners to have a clear understanding of their company’s finances. Separating these finances enables accurate tracking of a company’s financial assets, which makes it easier to assess the overall financial health of the company.

Moreover, keeping separate accounts minimizes the chance of potential errors occurring, which is crucial for tax compliance. Separating personal and business finances enables business owners to accurately calculate profits and costs, making it easier to file taxes and avoid any penalties or fines.

Lastly, separating personal and business finances protects your personal assets from any potential legal claims or creditor actions. If your business incurs debts or legal liabilities, it can be difficult to distinguish personal assets from business assets. By keeping separate accounts, you can protect your personal assets from any potential legal claims or creditor actions.

4. Invest in accounting software

Among the most rising fintech trends that await us this year, we can notice that software run by AI and chatbots is gaining more value to companies. However, tech is a big part of financial management as well. Nowadays, it’s hardly imaginable for any firm to perform its financial management without some kind of specialized finance software.

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One example of AI and chatbot software in the financial industry is the use of virtual assistants that can help businesses manage their finances by generating financial reports.

These solutions, often stemming from fintech app development, allow small businesses to integrate advanced tools into their workflows, offering a seamless way to handle tasks like expense tracking, invoicing, and bank reconciliations.

With these tools, business owners can easily generate financial reports and gain insights into their cash flow, profits and losses, and other key financial metrics.

In addition, accounting and finance management tools offer the ability to link to the company’s bank accounts and credit cards. Thus, businesses properly record their transactions, which eliminates the likelihood of errors in financial statements.

With cloud-based software in particular, business owners and their teams can access the company’s financial data from anywhere with an internet connection, making it easy to work remotely or on the go. The benefits of online payroll software abound: manage payroll more efficiently and accurately, automate tasks such as tax withholding and filing, direct deposit, give out rewards and bonuses—all while keeping your business data stored securely in the cloud.

5. Revise your internal procedures

It is easy for a business of any size to get overwhelmed with its own bureaucratic procedures. In time, as these processes keep piling up with no one to assess whether some of them have become redundant or not, it can drastically affect a small business’s capacity to manage its operations and finances without any bottlenecks.

One example of bureaucratic procedures that can affect a small business’s capacity to manage its operations and finances is a convoluted approval process for expenses. For instance, if an employee has to go through multiple layers of approval to get a $10 expense reimbursed, this can be a waste of time and resources for both the employee and the business. Over time, these bureaucratic procedures can pile up, leading to inefficiencies and decreased productivity.

Eliminating redundant procedures increases efficiency in your finance management by reducing the time and resources you need to perform certain tasks. As a result, your employees can focus on other important objectives that help grow the business, instead of wasting time filling out forms or going through layers of approvals for the simplest tasks.

Simply put, it is important to review your internal processes every now and again to make sure they are still relevant to the work your business does, and that none of them impede the management of your operations—financial or otherwise.

One example of a process that may need to be reviewed is the hiring process. If a business is struggling to find qualified candidates for a position, it may need to review its job requirements or job posting strategy to ensure they are attracting the right candidates.

To do this right, ask your team about their hands-on experience with current procedures and take their feedback into account.

6. Maintain good credit

Maintaining good credit is a major aspect of financial management for any business, but especially for small businesses. As a company expands, it will often need to purchase more commercial real estate, acquire more insurance policies, and take out more loans to support growth. Therefore, having a good credit score can help secure approval for these transactions and acquisitions.

Keeping good credit is not only essential to secure funding and acquisitions, but also establishes credibility and trustworthiness in the eyes of potential business partners, investors, and clients. Implementing good financial management practices helps small businesses ensure they have the financial foundation necessary to support growth and success in the long term.

One way to maintain good credit is to pay off debt funding as soon as possible. You should pay off any balances on business credit cards within a few weeks to avoid incurring interest charges.

It is also wise to avoid taking out loans with interest rates that are not affordable or beyond the company’s financial capacity to repay. Only seek funding you can quickly and easily repay to ensure the company’s financial stability.

In addition to paying off debt, business owners must monitor credit scores regularly. Check for any errors or inaccuracies that may have occurred in the credit report and take corrective measures to resolve them, using a reputable credit repair software. Also, be sure to stay current on all payments to creditors, including rent and utilities, to maintain a positive credit history.

Takeaway

Managing finances can be a daunting task for small business owners who lack the expertise or the resources to perform it effectively. However, with the right tools and expert advice, small businesses can streamline their financial processes and achieve their financial goals.

Hiring a bookkeeper or accountant can be a smart investment for small businesses struggling to manage their finances on their own. These financial experts can help ensure accurate accounting and financial reporting, keep businesses compliant with tax laws and regulations, and provide valuable financial planning advice.

Also, using specialized finance software and reviewing internal procedures can greatly increase efficiency and reduce the likelihood of errors in financial reporting. By automating tasks and eliminating redundant procedures, businesses can save time and resources, allowing their employees to focus on other important objectives that help grow the business.

Overall, by prioritizing effective financial management, small businesses can increase their chances of success in a competitive marketplace by making informed decisions to achieve their goals.

Small business finance management doesn’t have to be a complicated or daunting obligation. I hope that the ones we outlined in this article will help you do just that.

First published on April 21, 2023.