6 Tips To Manage Small Business Finances

1. Budgeting

Budgeting is one of the most important aspects of managing small business finances. By creating a budget, you ensure all important aspects are covered, instead of unnecessary spending. Most importantly, budgeting helps you make informed decisions on resource allocation.

2. Access Your Credit Score and Record

Your personal credit score and record have a consequential impact on your business financial plan. For instance, If you're planning on getting a small business loan lenders often look at your personal credit score to determine whether or not you're a good candidate for a loan. Loans and lines of credit can be negotiated more favorably when you have a strong credit score. 

3. Use Receipt Tracking Apps To Help Reduce Paperwork, Save Time, & Stay Organized

Receipt Tracking Apps are also very helpful in reducing paperwork, saving time, and staying organized. These apps can help you keep track of your business expenses by allowing you to add receipts with photos of the items purchased. You can then categorize them as either a purchase or an expense. It is so important to be able to know what types of expenses you are paying because this information will show up on your tax return as well. Receipt tracking apps are great help during the beginning of a business, especially during times where there’s no accountant. 

Some well-known receipt tracking apps as of 2022 are Evernote, Expense Reports, Quickbooks Self-Employed, and Expensify. 

4. Starting the Habit to Separate Yourself and Business Entity

It’s easy to fall into the trap of “this is my own business and it’s okay to mix my finances.” Having clear boundaries between your own spending and business cost, helps you track unnecessary spending in your business operation. Moreover, small business owners often fail to account in their own workforce. Here’s what you need to do: 

Step 1, give yourself a work title and monthly salary.

Step 2, set aside an account for business, or simply open a business account with any commercial bank. Maybank and CIMB Bank have had good reviews when it comes to financial services for small and medium enterprises (SMEs).

Maintaining a separate business account is important for managing your small business finances. By keeping your personal and business finances separate, you'll have a better understanding of where your money is going and what's coming in. Plus, it'll be easier to track expenses and stay organized come tax time.

5. Cash Flow Management

Entrepreneurs need to develop an understanding of their cash flow and the importance of being able to control it. Getting started is as easy as starting a record habit. Doing this will show you how much money is coming in, what needs to be paid out, and where the gaps are. You may want to use more than one type of budget depending on your situation; a detailed monthly budget that tracks income and expenses, a monthly cash flow forecast, or a quarterly cash flow forecast which tracks both income and expenses on an annual basis.

6. Deduction On Tax Deduction

If you are a small business owner, you may be able to deduct some of your expenses from your taxes. This can include things like office supplies, internet, and phone service, and even business travel. Be sure to keep track of your expenses throughout the year so you can take advantage of this deduction come tax submission time.

Running a small business can be hectic, and it's easy to let things like receipts fall through the cracks. Organizing your finances will save you time and hassle in the long run. Get into the habit of saving your receipts as soon as you get them and have an organized system for filing them away when they are no longer needed. You'll thank yourself later!  It is advisable to consider engaging a Business Consultant or SME Loan Consultant before any urgent need.

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