Unfortunately, entrepreneurial passion and financial savvy don’t always go together. As a result, small business owners often find themselves fretting over financial decisions and making missteps that can prove hard to recover from. This financial disconnect is one reason why it’s so important for small businesses to work with a trusted accountant or financial planner who can help them make smart financial decisions. Specific advice from the pros is invaluable, but it’s also helpful to follow a few general tips.
Use Accounting Software
Crunching numbers by hand often leads to mathematical errors and honestly isn’t much fun. Accounting software makes tracking financial data infinitely easier to do. Quality software not only tracks the money but can generate helpful reports, creating a snapshot of the company’s current financial standing. Even if a business owner finds these reports confusing, she can easily take them to an accountant for analysis and guidance on how to move forward.
Take a Paycheck
When a small business hits tough financial times, many owners save money by cutting out their own paycheck first. This self-sacrifice is noble, hopefully allowing the company to pay its bills while ensuring the workers still get a paycheck. This practice sometimes spells doom, however, and is best avoided.
There are two primary reasons for this. One is that no one survives without a paycheck for long. Small businesses are built on passion, but enthusiasm doesn’t pay the bills. Without a paycheck, the business quickly becomes a burden rather than a blessing, and keeping the doors open may no longer make sense.
There is also an emotional toll. Growing a small business takes an enormous amount of work, and it’s hard to stay motivated when it feels as though there is no return on the investment of time and energy being spent.
Put Money Back In
After struggling through a rough startup or difficult time, it’s a relief to see business pick up. When more money starts coming in it’s important to invest a good portion of it back into the business. It’s nice for small business owners to give themselves that long-awaited raise, but the business won’t grow if it doesn’t get fed. Upgraded equipment, broader marketing campaigns and building maintenance, for example, can all greatly benefit a business and all require capital. The owner’s pocket typically isn’t the best place to put the money.