9 tips for managing small business finances

Irrespective of the scale, running a small business is more challenging than it may seem. From providing services or overlooking and taking part in the manufacturing process to marketing your brand and managing finances, a small business owner has a lot on their plate. 

Often, small businesses have a few team members on board; even then, complex business tasks like financial management are more challenging. 

Considering financial management is the backbone of every business, irrespective of its size, a minor error in bookkeeping can take a massive toll on your business’s growth and revenue. Therefore, adequate financial management is necessary for making it through competition and a volatile economy. 

Running a successful business requires much more complex work than executing a good idea. So apart from good marketing skills and a strong business strategy, every small business owner needs these eight tips for taking your business to the next level. 

  • Differentiate business and personal finances

An essential financial management tip for all business owners is to separate personal and business expenses. Even if you are solely running the business, it can be tempting to mix personal and business expenses. The best way to do this is to get a business credit card. Getting approved for insurance claims, purchasing assets, or business loans is easier with a business credit card. A monthly credit limit on the card will help manage business expenses and not mix up with your personal budget. You can also stay on top of your debt repayment with a credit card to maintain a good credit score.

  • Create a billing strategy 

Creating a billing strategy helps manage business cash flow. For example, you will eventually encounter a client with an outstanding invoice or a habit of late payments. While you can’t force clients to pay on time, you can develop a billing strategy to keep your cash flow consistent. For example, through the “2/10 Net 30” approach, you can offer a 2% discount on payment within ten days of the invoice so that your finances are in line. But there is no guarantee that your client will stick with that routine. Instead, use debt recovery services like Direct Route for a steady billing strategy. With a robust collection strategy, Direct Route ensures a consistent payment schedule without you having to worry about it. 

  • Educate yourself on financial management

Educating yourself on financial management is one of the most important things you can do for your business. Without having the necessary financial plans in place, it can be hard to successfully run and grow your brand. Luckily, there are many different resources out there, similar to donor advised fund management protocols that you can depend on, to help ensure your finances are as strong as they can be. Alongside this, when you start a business, you must have a clear idea of maintaining a cash flow statement, a budget for your business, an income statement, a balance sheet, and an equity statement. Cash flow statements are necessary for recording investments and cash flow in and out of your business. Similarly, a balance sheet helps in tracking assets and liabilities. Knowing these terms will help you manage finances better, even if you have a bookkeeper on board.

  • Pay yourself first

In addition to keeping your personal and business expenses separate, be mindful of paying yourself on time. As a small business owner, investing all your earnings into the business may be tempting. But, remember that you are actively providing your services or labor to run a business, so you must be paid like paying for any other business expense. Paying yourself a salary will help keep your budget and finances in check and separate from business expenses. With a monthly salary, you can build up savings and keep personal finances separate from the business. A personal savings account is also necessary for paying unforeseen expenses like a healthcare emergency. 

  • Follow Accounting best practices

When setting up your small business, you will need to choose between cash and accrual basis accounting, especially if you don’t have someone on the team entirely focused on financial management. Cash basis accounting manages your business’s cash activity. It records the flow of cash in and out of your business. Though easy to learn, cash accounting gives a limited perspective on business finances and is not suited for inventory-based businesses. Accrual basis accounting is slightly complex as it records revenue and expenses when they occur, regardless of simple cash inflow and outflow. Accrual basis is a bit time-consuming but gives a better overview of finances than the former. Remember to also register for VAT as soon as your business passes £85,000 in turnover or you predict that, within the current financial year, you will pass that level of revenue.

However, if you need help with your accounting tasks, you can always seek assistance from reliable accountants. Many firms like Hurley & Powell Accounting have qualified professionals to handle simple and complicated accounting tasks for small, medium, and large-scale businesses. They also undergo rigorous training to ensure they maintain high industry standards in accounting.

  • Maintain a budget for your business 

Setting up a budget for your business is necessary to meet expenses without running down on your savings. A budget will help you meet your recurring expenses but help prepare for unforeseen financial setbacks, especially if your business is operating in a volatile economy. To maintain a budget, set aside money to buy new equipment, designate funds for marketing, investment, and paying business employees. 

Moreover, examine your revenue to know how much your business brings each month. Your budget should also include a contingency fund to cover the unexpected costs. With the extra money, you’ll be ready to finance an emergency, such as replacing broken equipment or inventory damaged by a natural disaster. Finally, review your budget periodically to ensure you have sufficient money to meet your business’s financial needs. 

Remember, with enough financial resources, you can run your daily operations without any financial worries. The key to doing this is to stick with a flexible budget to accumulate savings for your business.

  • Reduce Costs

Second to maintaining a budget is to incorporate cost-effective strategies in your business. Cost management may seem overwhelming, especially as a small business owner, but it sets apart a profitable business from the one operating at break-even. Getting caught up in business tasks and forgetting to upgrade your financial or marketing practices is convenient. But sometimes, old practices are the ones draining your budget. For instance, to save time, you can switch to using cloud-based accounting software to manage finances. Or automate your marketing tasks with the help of an AI-driven tool. One of the best features of the digital era is abundant technological tools that help reduce business costs and save time investing in high-value tasks. 

One of the most efficient ways to master and excel at cost management is to hire an accountant who will indicate where you need to cut back and where you need to invest to make your venture as profitable as possible. To find a reputable accounting firm in your area, you can simply search online for a “small business accountant near me.” Of course, however, be sure to check out reviews of any local accountants to make sure they are a suitable fit for your business before engaging their services.

  • Increase Cash Flow

A crucial financial management tip is to increase your business cash flow consistently. Cash flows are relatively unstable for small businesses, and regardless of popular belief, there are plenty of ways to improve them: 

  • Announcing promotional events to increase sales
  • Seasonal sales 
  • Special offers or fringe benefits for existing customers or clients
  • Training programs or courses for service-based small businesses
  • Providing incentives for early payments 

Increasing your cash flow will ensure your business has enough money to meet its financial obligations and plan for the future. Remember, cash flow can be considered the lifeblood of your business. It’s essential because it helps you understand its financial health and performance.

  • Consider business loans

You may or may not need to take out a business loan at some point. A business loan can help with debt repayment or when you need to upgrade business equipment, especially if you are low on savings. A business loan can also help deal with cash flow issues and has immense growth prospects. To qualify for a business loan, you will need well-maintained business and financial records and a good credit score. Though every lender has different requirements, the basic ones are:

  • An accurate business plan
  • Records that demonstrate your business’ credit and financial health
  • Designating collateral in case of non-payment of loan
  • Copies of license and other contracts 

By keeping these requirements in mind, you’ll know whether you’re eligible to apply for a loan for your business. Different types of business loans are available on the market, so it may be best to work with a business loan broker to help you find the right loan for your company. They can also help simplify the loan application process so you can pay attention to running your business correctly.  


Regardless of your financial acumen, you can become an expert at handling your business finances with trial and error and a bit of learning. In addition, not every small business has the budget to recruit an employee for financial management. Therefore, educating yourself on financial management for your business and yourself is best. Make sure to pay yourself a salary to keep your business and personal expenses separate and plan your business accordingly.