Financial habits and practices that can help small businesses manage their finances
One of the main and perhaps more difficult tasks for small business owners to manage is their business finances. It is a vital element to create a stable financial future for the company. However, that doesn’t mean it doesn’t come with its challenges. Some fundamental practices are important to implement in the early stages to create good financial habits within the business.
Here are three financial practices for small businesses in Trinidad and Tobago:
- Pay Yourself
In the early stages, many owners of small businesses don’t pay themselves. The payment of day-to-day operations is the priority during this time however, owners mustn’t overlook their role and the value of that work. The work done by an owner should be compensated. It is also a great practice to implement early on because it helps separate personal and business finances.
- Have An Effective & Organized Billing Strategy
One of the most critical financial responsibilities for any business is staying on top of invoices, payments and the management of cash flow. Very often owners of small businesses have to check their finances and billings on a day-to-day basis. Creating an effective system and being strict with how often you check your finances is a vital practice to stay on top of it. It is also important to implement any procedures or even applications that will help with these practices. For example:
- There are a plethora of online financial websites and applications that help businesses keep on top of their money, create invoices (with regular reminders), track payments and more. Some of the popular apps are QuickBooks, FreshBooks and Zoho Books. Many e-commerce solutions offered by local banks also offer invoicing as a part of the service.
- Companies that have issues with payments often implement systems to curb late payments, such as “2/10 Net 30” which is a policy that gives customers a 2% discount if they pay within 10 days.
- Create Good Financial Habits
The earlier a business creates good financial habits the better. These can include simple practices such as setting strict times for reviewing and updating financial information to more complex procedures such as management of cash flow. Creating these systems ensures that a company has well maintained internal controls that will ensure the owner stays on top of finances and aids in mitigating risks such as fraud or theft.
Creating these habits early on can save businesses in the long run.
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