16 Tips For Managing Your Small Business Finances

in Finance by Richard Bertch

16 Tips For Managing Your Small Business Finances

Managing a small business's finances can be a daunting task. There are a lot of moving parts, and if you're not careful, it's easy to let things slip through the cracks. It can be easy to ignore certain things when you're just starting out because you're focused on other aspects of the business, but it's important to stay on top of your finances from the very beginning.

Here are 8 tips for managing your small business finances.

1. Keep Accurate And Up-to-date Financial Records

The foundation of good bookkeeping and accurate financial accounting has complete and accurate records. This means recording all income and expenses in a timely manner and keeping track of receipts, invoices, bank statements, and other documentation. One of the best ways you can go about this is to record transactions using accounting software like Xero or QuickBooks. Doing this will save you a lot of time and headaches down the line.

2. Understand Your Financial Statements

Your financial statements are like a snapshot of your business’s financial health. They give you an overview of your income, expenses, and profitability. There are three main financial statements you should be familiar with: the balance sheet, the income statement, and the cash flow statement.

  • The balance sheet shows your assets, liabilities, and equity at a specific point in time. This can be helpful in understanding what your business is worth and how much debt it has.
  • The income statement shows your revenue and expenses over a period of time, typically one year. This can be helpful in understanding whether your business is profitable or not.
  • The cash flow statement shows the inflows and outflows of cash for your business over a period of time. This is helpful in understanding whether you have enough cash on hand to cover your expenses.

3. Create A Budget

Creating a budget is one of the most important things you can do for your small business. A budget helps you track your income and expenses, and it makes it easier to identify areas where you may be overspending. It also forces you to think about your long-term financial goals and how you can best achieve them.

When creating a budget, you should start by estimating your income and expenses for the year. Then, you can break down your expenses into categories, such as marketing, rent, payroll, and so on. Once you have a good understanding of your income and expenses, you can start to allocate funds accordingly and make adjustments as needed.

4. Make A Plan For Cash Flow

Cash flow is the lifeblood of any small business. It’s important to have a plan in place to ensure that you always have enough cash on hand to cover your expenses. One way to do this is to create a monthly or weekly budget that includes all of your income and expenses. Then, you can transfer funds from your business account to a personal account or vice versa as needed.

Another way to manage your cash flow is to use invoicing and accounting software like Xero or QuickBooks. This software allows you to track your invoices and payments, and it gives you a real-time view of your cash flow. This can be helpful in preventing cash flow problems before they happen.

5. Keep Track Of Your Inventory

If you sell products, it’s important to keep track of your inventory levels. This information can help you make decisions about ordering new merchandise, pricing products, and more. There are a few different ways you can keep track of your inventory, such as using Excel spreadsheets, barcode scanners, and accounting software.

In addition to keeping track of your inventory, you should also have a good understanding of the inventory best practices for your industry. There are various ways to account for and monitor inventory, including the first in, first out (FIFO) method and the last in, first out (LIFO) method.

6. Understand Your Taxes

As a small business owner, it’s important to have a basic understanding of the different types of taxes you may be required to pay. These include income tax, self-employment tax, and payroll tax. It’s also important to know when these taxes are due and how to file them.

Your accountant or tax advisor can help you understand the different types of taxes you owe and when they’re due. They can also help you file your taxes in a timely and accurate manner. You should also consider investing in a good tax software that will help you stay on top of your tax obligations.

7. Stay On Top Of Your Bookkeeping

Bookkeeping is the process of recording and tracking financial transactions. It’s important to stay on top of your bookkeeping so that you have accurate financial records. This information can be used to prepare tax returns, track expenses, and make other important business decisions.

There are a few different ways you can keep track of your bookkeeping, such as using Excel spreadsheets, accounting software, or hiring a bookkeeper. If you use accounting software, be sure to back up your data regularly to avoid losing any important information.

8. Stay Organized

One of the best ways to manage your small business finances is to stay organized. This means keeping track of your income and expenses, as well as any other important financial documents. You can use accounting software to help you stay organized, or you can create your own system using Excel spreadsheets or manila folders.

9. Understand Your Credit Score

Your credit score is a number that lenders use to determine your riskiness as a borrower. The higher your credit score, the more likely you are to qualify for loans and lines of credit. Therefore, it’s important to understand what factors contribute to your credit score and how you can improve it.

You can get a free copy of your credit report from each of the three major credit bureaus once per year. This report will show you your current credit score and any factors that are affecting it. You can also use credit monitoring services like Credit Karma to track your score over time.

10. Hire An Accountant

If you’re not comfortable managing your own finances, you can always hire an accountant. An accountant can help you with tasks like preparing and filing your taxes, creating financial statements, and more.

You don't have to hire an accountant after your first year in business, but you do need to have a good understanding of your finances. This includes knowing how to read financial statements and tax returns. If you're not comfortable managing your own finances, consider hiring an accountant or taking a class on small business accounting.

11. Review Your Expenses Regularly

It’s important to review your expenses on a regular basis to ensure that you’re not spending more than you can afford. You can use accounting software to track your expenses, or you can simply review your bank statements and credit card bills each month. Being willing and able to trim the fat where you find it is an essential part of running a lean, successful small business.

12. Have An Emergency Fund

No matter how well you plan, there will always be unexpected expenses. That’s why it’s important to have an emergency fund to cover these costs. You should aim to have enough money in your emergency fund to cover 3-6 months of living expenses. This will help you weather any financial storms that come your way.

13. Invest In Business Insurance

Business insurance is a must for any small business owner. This type of insurance can protect you from lawsuits, natural disasters, and other types of losses. There are many different types of business insurance, so be sure to talk to an insurance agent to find the right policy for your business.

14. Plan For Retirement

It’s never too early to start planning for retirement. If you don’t have a retirement plan, now is the time to start one. There are many different types of retirement plans available, so you’ll need to do some research to find the best option for your business.

Most small business owners are sole proprietors, which means they can open an Individual Retirement Account (IRA). An IRA is a type of retirement account that offers tax benefits. You can contribute up to $5,500 to an IRA each year ($6,500 if you’re 50 or older).

15. Use Financial Tools

There are many different financial tools available that can help you manage your money. These tools can help you track your spending, create a budget, and more. Some popular financial tools include Mint, You Need A Budget, and Personal Capital.

16. Invest In Yourself

One of the best ways to improve your financial situation is to invest in yourself. This means taking courses, attending seminars, and reading books that will help you develop your skills and knowledge. When you invest in yourself, you’re investing in your future.

Seek Professional Help

If you’re having trouble managing your finances, you should seek professional help. There are many different professionals who can help you, such as financial advisors, accountants, and credit counselors. These professionals can help you develop a plan to get your finances back on track.


These are just a few tips for managing your small business finances. If you follow these tips, you’ll be on your way to financial success and a better understanding of how to manage money and make it work for you.

About the Author

Richard Bertch

Richard is a contributing finance author at ChamberofCommerce.com and freelance writer about all things business, finance and productivity. With over 10 years of copywriting experience, Richard has worked with brands ranging from Quickbooks to Oracle creating insightful whitepapers, conversion focused product pages and thought leadership blog posts. 

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