As a small business owner, you have a lot on your plate. You wear a lot of hats.
Head of marketing, head of sales, head of HR, head of IT. You may even be head of cleaning.
If you run your business alone, you have the added pressure of doing it all solo.
But whether you lead a team of 1 or 21, your day-to-day focus is the same: growing your business. That includes increasing brand awareness, elevating your product or service, attracting and retaining the right type of customer and staying ahead of the competition.
One thing you shouldn't have to obsess about on a daily basis is cash flow. By implementing some simple processes, the worry of whether you’ll have enough money in the bank to stay afloat should be alleviated.
Here are our top 3 tips.
Tip 1: Have a rainy day fund
You probably have an emergency fund for your personal finances. That’s a pot of money you can easily access in case you need to cover unexpected costs, such as a new boiler or car repairs, without having to use credit.
But do you have a rainy day stash of cash for unplanned business expenses?
While it may be tempting to plough all your money into perfecting your product or service, what happens when things go wrong? All businesses experience setbacks. The key is to be prepared for them.
These setbacks could be anything: broken or damaged stock, a seasonal lull in customers, a dip in sales that lasts longer than expected, or a global pandemic!
Having a pot of readily available money means you’ll be able to cover any unavoidable and unforeseen costs. The general advice is to have three to six months of business expenses set aside.
Tip 2: Review your costs regularly
Costs reduce profit, so staying on top of your outgoings should be a key priority. It’s worth implementing a monthly review to pinpoint any unnecessary expenditure.
A good starting point is to check your monthly statement. Go through it line by line to make sure you’re not needlessly spending money, such as on subscriptions or services you no longer use.
It’s also worth checking your invoices to ensure you’re paying what you agreed with your suppliers. It’s all too easy to quickly sign off an invoice without looking at it properly. But it’s vital to stay on top of who you’re paying and how much you’re paying them.
Reviewing your costs is also a good opportunity to spot any cost-saving opportunities. Are there services you use that can be streamlined? Are you overpaying for accountancy or legal advice? If you have a retainer with an IT company, for example, is it really adding value to your business?
Trimming your spending can have a significant impact on your cash flow.
Tip 3: Separate your business and personal accounts
It might sound obvious but keeping your business and personal accounts separate is a very good idea, for many reasons.
- You’ll have an instant insight into the cash flow of your business. If your personal income and expenditure is mixed together, it will be harder to spot when things aren’t going so well and when you need to make changes to improve your bottom line.
- It’s easier to identify allowable expenses when it comes to filing your tax return. If you use an accountant, it will mean fewer billable hours as they won’t have to spend time separating your personal and business expenses.
- It looks more professional to clients.
- It offers you an extra level of protection should one of your accounts be hacked.
But it’s not just current accounts that should be separated. It’s also a good idea to separate your business savings from your personal savings. That way you’ll know exactly how much you have set aside to dedicate to your business when it comes to making purchases, investments or upgrades. You also won’t be tempted to dip into your personal emergency fund if you have an unexpected business cost to cover.
If you want a simple way of managing your personal and business saving accounts, consider using a cash management platform like Akoni.
Akoni uses Open Banking technology to enable savers to monitor their money and seamlessly switch accounts when a better deal becomes available.
You have access to your own personalised dashboard where you’re able to view all your personal and business savings - wherever they’re held - in one place, giving you ultimate visibility of all your savings and providing you with a total picture of your personal finances.
You can quickly and easily book market-leading rates and be assured that your money is protected by the Financial Services Compensation Scheme (FSCS).
Want to find out more about how Akoni’s award-winning platform can make managing your cash easier? Get in touch today.