Happy Small Business Week!
Celebrated during the first week of May, Small Business Week is an annual chance to recognize the critical contributions of America’s entrepreneurs and small business owners. According to the U.S. Small Business Administration, which has celebrated this week for more than 50 years, more than half of Americans either own or work for a small business. These businesses also create nearly two out of every three new jobs in the U.S. each year.
In conjunction with Small Business Week, we’d like to share some financial management tips for small business owners.
1. Create a budget. Focus on both your expenses and how much money you’ll need to make to cover those expenses. Maintaining a reminder of your goal can motivate you to sell more and encourage you to limit your expenses to only those you need to make. If accounting isn’t your strength, invest in a bookkeeper or accounting software, but remain familiar with the finances yourself to avoid any potential employee fraud or theft.
2. Price yourself correctly. You provide a worthwhile service, so ask for what your service is worth. If you price yourself too low, you’ll feel increasingly resentful of all the work you do for too little income. But also beware of overpricing yourself, which could drive potential customers away.
3. Manage expenses. Minimize travel costs and, when possible, capitalize instead on the recent surge of virtual options. Offer only government-mandated benefits to maximize your flexibility during potential lean times in the future. Limit legal fees by setting clear expectations, choosing cost-effective billing for your needs (hourly or per project), and considering do-it-yourself legal documents in simple situations. You can even delay purchasing business cards, signs, marketing materials, cars or inventory until actual revenue starts coming in to prevent a cash flow backup. In short, remain frugal and study not only what you’re paying, but the return on those investments – if they’re not worth what you’re spending, cut them out.
4. Manage cash flow. When money comes in and out can be nearly as important as whether it comes in and out. A good billing strategy that encourages quick payments – perhaps even utilizing small discounts – can keep the money rolling in to cover the expenses you can’t cut out. Stay on top of your invoices, using invoice numbers and cross referencing those with payments. City Bank’s Cash Management technology gives you flexibility and in-depth access to your accounts, 24/7, letting you simplify payroll procedures, designate your desired level of employee access to specific functions within accounts, and use Positive Pay to help prevent check fraud.
5. Plan ahead. You should keep enough cash on hand for three months’ worth of living expenses and business expenses, just in case. And keep an eye out for potential obstacles so you can anticipate and address them. When you have extra funds, invest in your future growth.
6. Don’t wait too long on loans. Hand in hand with planning ahead, if you wait until you’re in financial trouble to seek a loan, your likelihood of being approved decreases. Apply for a loan when your finances are in good shape so you have extra on hand. The influx of capital can allow you to purchase equipment, grow your team, boost your cash flow, pay employees and suppliers, or even respond to an unforeseen emergency. But to get that loan, you have to maintain good credit, so pay your debts as quickly as possible and only seek funding you can repay swiftly and easily.
7. Don’t mix business and pleasure. That is, if you make a personal loan to your business, keep accurate records of that and pay yourself back. Also, keep a designated business account so you can easily track your expenses and gauge your profits. City Bank’s Small Business Checking account is a great option that gives you free online access to your balance, activity, paid check and deposit ticket images, and more. And with no monthly service charge, it even helps small businesses minimize expenses. Additionally, use a business credit card, not your personal card. Do you need a business credit card? City Bank offers a line of feature-packed, low-rate credit cards1 designed to give you convenient purchasing power. There is even a card option that allows the ability to set individual spending limits for employees. See the full suite of cards here.
8. Pay yourself first. Don’t get greedy – you still want to limit expenses, after all – but you need to make sure you are setting some money aside consistently for your future, regardless of whether the business succeeds.
9. Take care when expanding. The goal is to grow steadily and wisely, not drastically. Along those lines, you may want to consider renting – not buying – your office space and some equipment. Leasing can help you avoid maintenance costs and simplify the process of relocation as your business grows.
10. Don’t be afraid to ask for help. Some things you can do yourself – after all, you started a business on your own. You can even take control of your own marketing and public relations, so long as you follow established strategies to keep your efforts focused and intentional. But in areas where you don’t feel capable, look for partners whose strengths complement your own.
From new technology to process payments more efficiently to remote deposit opportunities, City Bank offers a range of additional services to help small businesses succeed. For more information on our full scope of Treasury Management tools, call (800) 687-2265 and speak to a Treasury Management Specialist today.
Happy Small Business Week, and from all of us at City Bank, thank you for everything you do!
1Subject to credit approval. Ask for details.