If you own a small business, you know there is no such thing as a ‘magic business formula’ that will have any business rolling in cash to take to the bank. However, successful small businesses are found to have certain common characteristics, which you can learn and build on to help make your small business a success as well.
So, what are successful small businesses doing to maximise their profitability?
- Keep your personal funds and your business funds separate
You might be thinking, it’s my business therefore it’s my money? Well, whether you’re a sole proprietor or a limited liability company, separating funding is always a good practice for any small business. Mixing the two might cause confusion and can potentially be a mess when tax time rolls around. The majority of successful business owners will treat their business as a separate entity – no matter how big or small it is. Separating funds is an excellent way to keep track of financial records.
- Consider cloud accounting software
There is an abundance of cloud accounting technology available, which you can use to cover all of your accounting requirements, scalable from start up right through to large enterprise. The benefits of cloud accounting are almost endless. Firstly, business owners like you can access a real-time snapshot of your financial situation, any time, any place. With the ability toscan your own documents on the go – you can save serious time and dollars. You can track your expenses, generate invoices and receipts and store client data without cramming your hard drive. Integrating cloud accounting solutions into your business can give you more time to get down to what’s really important – like revenue generating activities, such as improving customer satisfaction.
- Don’t be afraid to chase the money you’re owed
Now, we’re not saying you need to spend all of your time being a debt collector but it’s important to understand that collecting money on time is crucial to your success. Make your invoice payment terms and due dates crystal clear and politely chase up your clients. Late payments are often the result of a forgetful memory and can be quickly resolved, so don’t be reluctant to ask! At the end of the day you need to stabilise your cash flow.
- Effectively manage your debt
Understand that debt is simply a fact of life for a lot of small businesses, especially during the start up stages. It doesn’t necessarily equate to losing funds, however successful small business owners know how to manage their debts. Make sure you keep track of all borrowing costs, especially when variable interest rates are involved and regularly check your debts and try to implement steady repayment plans to keep you on top. And don’t forget that interest payments incurred in the course of doing business are tax deductible.
- Focus on the future but stay realistic
Businesses don’t magically become successes over night – they require ambition and a lot of perseverance. Successful business owners aren’t scared to make mistakes or experiment, however it’s important to make financial decisions, which will support your choices in times of success and the occasional failure. Risk taking is part and parcel of running a business, but keep vigilant, measure everything and watch your cash flow – have a read of a blog on tips for improving your cash flow management.
- Always ask for help
Not all business owners are financial wizards. Don’t hesitate to seek assistance or ask for help when something isn’t quite making sense to you. In saying this, make sure you seek help from the right people. Your accountant or financial advisor is a great place to start.