If you have been following our “Leadership in Small Business” series, first, thanks for reading!
Second, you already know that successfully leading your business is a full-time job. Getting a small business up and running is no easy feat. In fact, 80 to 90 percent of startups fail during the growth stage. The primary reason for failure is due to a lack of money.
Although money isn’t the only important thing in running a small business, it will certainly help make your life easier and pave the way to success. The good news is you don’t have to have an MBA or be a certified accountant to manage finances. Here are five ways to help you keep your business finances healthy.
1. Build a financial system.
Your first step should be to build a solid financial system that your employees and your customers can follow—and one that you can depend on. It can be easy to lose track of invoices, bills, and customers if you don’t have an organized financial system, and that can lead to disaster.
By taking the time and spending a little money upfront to build and establish a working financial system, you can keep track of invoices, receipts, payments and transactions, which is important for ensuring healthy cash flow.
2. Make billing and invoicing a habit.
Although billing and invoicing aren’t the most exciting areas of running a business, they should be a priority. Getting into the habit of billing and invoicing on a regular basis will not only ensure healthy cash flow within your business, but it will help get customers to pay in a timely manner.
3. Make it easy for customers to pay.
While we are on the subject of billing, invoicing, and customer payments, one way to make sure that customers pay in a timely manner is to make it easy for them to pay. For example, setting up multiple convenient payment methods, such as cash, credit card or PayPal can help. The easier you make it for customers to pay invoices, the more likely they will make on-time payments.
4. Establish your pricing model.
Many businesses are inconsistent with what and how they charge customers. Of course, every customer’s budget is different, and every business offers sales, discounts, and promotions during certain times of the year, however, establishing a baseline pricing model can help keep payments consistent. Additionally, having a consistent pricing model can help plan your business’ financial goals.
5. Are you charging enough?
If you already have a pricing model in place, then it may be time to review it to make sure you are charging enough. If you have been in business for a few years, then it may be time to consider increasing your prices. In fact, a price increase typically results in at least 10 percent profit margin growth. If you are unsure of what to charge or if you are worried about overcharging, then compare your pricing model with that of your competitors.
Keeping your finances healthy should be a priority for new entrepreneurs and small startup businesses. Establishing a solid financial system will keep your finances healthy well into the future.