When you think about thriving small businesses, what comes to mind? A strong customer base? Innovative ideas? While those are crucial, there’s another key factor that often gets overlooked: smart financial habits. The way a business handles its money can make or break its long-term success.
Whether you’re just starting out or looking to level up your operations, developing these financial habits can set you on the path to thriving. Let’s dive in!
1. Consistently Reviewing Financial Reports
If you’re not reviewing your financial reports regularly, you’re flying blind. Successful businesses keep a close eye on their Profit & Loss statements, Balance Sheets, and Cash Flow Statements. These reports tell the story of your business’s health—are you profitable, staying on budget, and managing your cash flow effectively?
What to do:
- Set aside time every week or month to review your reports.
- Use tools like QuickBooks or Xero to make report generation easier.
- Don’t just glance at the numbers – look for trends and ask yourself what they mean.
2. Keeping Personal and Business Finances Separate
This one seems obvious, but it’s a mistake many small business owners make, especially early on. Mixing personal and business finances can create headaches when it comes to taxes and make it impossible to gauge how your business is performing.
What to do:
- Open a business bank account and credit card if you haven’t already.
- Pay yourself a salary or owner’s draw rather than dipping into business funds directly.
3. Maintaining a Cash Reserve
Imagine this: an unexpected expense pops up, or business slows down for a few months. Do you have a cushion to fall back on? Thriving businesses do. A cash reserve is like a safety net, giving you peace of mind and flexibility when things don’t go as planned. When I started my business, I set aside 10% of each deposit I received but use whatever amount works best for you!
What to do:
- Start small – set aside even 1% of your monthly profits if that’s all you can afford.
- Build toward a reserve that covers at least 3-6 months of operating expenses.
4. Budgeting for Growth and Expenses
A budget isn’t just about limiting spending; it’s a tool to ensure you’re using your resources wisely. Thriving businesses create budgets that factor in both day-to-day operations and long-term growth.
What to do:
- Review your budget quarterly and adjust as needed.
- Allocate funds for growth opportunities like marketing, employee training, or new equipment.
5. Staying on Top of Receivables and Payables
Cash flow is the lifeblood of any business. Even if you’re profitable on paper, cash flow issues can bring operations to a halt. Successful businesses stay on top of who owes them money and what bills they need to pay.
What to do:
- Automate invoicing and payment reminders to clients. Most accounting software, like QuickBooks Online can do this for you!
- Set clear payment terms with clients and vendors, and stick to them.
6. Regularly Reassessing Pricing and Costs
The market changes, and so do your expenses. Thriving businesses know the importance of evaluating their pricing strategy and cutting unnecessary costs to stay competitive and profitable.
What to do:
- Annually review your pricing. Are you charging enough to cover rising costs?
- Audit expenses for inefficiencies. Are you paying for services you no longer need?
7. Investing in Financial Education
You don’t need to be an accountant to understand your business’s finances, but having some basic knowledge can make a huge difference. Thriving businesses often invest in learning about finance so they can make informed decisions.
What do do:
- Read books, take online courses, or attend workshops on business finance.
- Stay updated on trends or tax changes that could impact your business.
8. Delegating or Outsourcing Financial Tasks
Trying to do everything yourself is a fast track to burnout – and mistakes. Successful business owners focus on what they do best and delegate the rest, especially when it comes to managing finances.
What do to:
- Identify tasks that you can outsource, like bookkeeping or payroll.
- Partner with a reliable professional to ensure your financials are accurate and up to date.
In conclusion, developing strong financial habits isn’t about doing everything perfectly – it’s about being consistent and intentional with how you handle your money. These habits can help you avoid financial stress, build a stable foundation, and position your business for growth.
Start small. Pick one or two habits to focus on this month, and build from there. You’ll be amazed at the difference it can make!
Need help with your financial processes? Let’s chat! Together we’ll make sure your business is set up to thrive.
The information provided in this blog post is for general informational purposes only and should not be considered professional financial or business advice. Every business is unique and you should always consult with a qualified professional for advice tailored to your specific situation.