Room to grow

Six strategies for growing a financially healthy business.

By Hannah Massen 

People start businesses for all kinds of reasons – but a love for crunching numbers usually isn’t one of them. The last thing you want is to be scrolling through spreadsheets at 4:45 p.m., so you assume that as long as your numbers are in the black every month, there’s no need to question your company’s financial health. 

Setting your business up for financial success is about more than paying your annual expenses. You might be able to turn a small profit in the short run, but without a firm understanding of your income and expenses, your growth options may be limited. Use these tips to build a financially healthy business. 

1. Look for trends

It’s never too early or late in the year to review past balance sheets. Look for revenue trends between months, seasons, and years so you know what’s working for your business. For example, if sales spiked last September because you invested in new signage and advertising, you’ll know to spend more money on marketing next quarter. 

2. Trim down your expenses

There’s no way around paying for rent, inventory, or your insurance plan. But do you really need that monthly subscription to video editing software? And are you sure your suppliers are offering you the best deals? Take a good look at your last billing statements and notice if you’re overpaying for products and services. Cancel subscriptions you no longer use, switch to more affordable services, and don’t be afraid to negotiate with your long-time product merchants. 

3. Keep up with your billing

It’s tempting to leave billing for the last minute, but waiting until the last day of the month to send out invoices or pay for services is asking for trouble. If clients owe you money, the faster you send out invoices, the sooner those payments hit your bank account. You can automate the process by sending invoices through Quickbooks or Chargebee mid-month, giving clients plenty of time to respond. If your business is the one being billed, remember that late payments and balances mean late charges and interest, which can drain your reserves quickly – and trigger a hefty IRS bill. Pay your taxes on time, keep up with your bills, and consider setting up automatic payment plans from your business’ bank account. 

4. Track expenses in real time

If you toss receipts in a literal or figurative shoebox, it’s time to break that habit now. As soon as you spend money – whether it’s on office supplies, shipping, or display items – record it. Use a system that works well for you and your team (such as an app like Concur or a simple spreadsheet) that lists dates, what you bought, the amount, and expense categories. This will help you keep track of exactly how much is in your bank account at all times. 

5. Build business credit

According to the U.S. Small Business Administration, 45 percent of small business owners don’t know they have a business credit score. Their businesses actually have 10 to 100 times greater credit capacity compared to personal credit. Being able to access business credit can be a make-or-break moment for your business, especially in a crisis. Having good business credit means you won’t have to rely on personal credit alone when seeking funding, making you eligible for better loans from the bank. 

6. Create an emergency fund

Business income isn’t always predictable, as we all know all too well. Even so, nearly half of small businesses in the United States have a cash buffer of less than one month. Having an emergency fund can give you the breathing room to make good business decisions – not just decisions made out of panic. And even if your fears are never realized, that money could be used to invest in a growth opportunity or hire new talent. It may feel counterproductive to put money away if you’re just scraping by, but it’s worth it.

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