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How to Manage Finances in Business

A business owner’s to-do list is never-ending! You may be an expert at building and marketing your products or services, but you may not have the experience to master your business’ finances.

When you’re caught up in the daily grind, it’s tempting to avoid the burden and confusion of financial decisions until the very last minute. Yet, this can lead to a very slippery slope, as you might be adopting poor financial habits that can harm your business in the long run. A crucial part of running a successful business is solid company financial management, which creates a sound environment for your venture to grow and thrive.

Studies show that 20% of small businesses fail within the first year. Further down the line, we see that 50% fail within the first five years. The reasons behind these numbers usually boil down to a lack of preparation.

Business owners need to be savvy. They should always consider ways to distribute their investments while optimizing their time and resources. A well-planned financial strategy can go a long way in safeguarding themselves from failure in the future.

“If you’re not looking 5 to 10 years ahead, you are behind the competition,” said Tina Gosnold, founder of QuickBooks’ specialist firm Set Free Bookkeeping.

This article will look at how to manage your finances in a business and explore key strategies to help you plan for a rainy day!

10 Smart Ways to Manage Finances in a Business

Separate Personal and Company Expense

When starting your business, learn how to organize your finances. Although it may seem like an extra burden, opening a business account is an essential step. A business bank account can make keeping track of business and personal transactions feel like a breeze! Make sure to look for a bank that offers free cheques and unlimited transactions and does not charge monthly maintenance fees.

Take Advantage of Tax Breaks

Paying taxes is a cumbersome but necessary process for all businesses. Yet, you can cut the amount you pay toward taxes by understanding your federal, state, and local tax laws. The best states for business taxes offer well-structured tax systems that benefit small businesses.

You can charge business expenses, like travel and supplies, to your business account or credit card as a business owner. Some credit cards offer rewards, cashback, or points for business expenditures. As an added advantage, the IRS allows you to deduct these expenses, provided you have the correct documentation to support them. You can then confidently face tax season knowing your finances are in order.

Reach Out to the Experts

If you get overwhelmed by the numbers, don’t hesitate to hire a professional! Bookkeepers and accountants can help you balance your finances to track your profits and costs accurately. Another alternative is investing in DIY accounting software that automates billing, inventory, invoicing, and taxation quickly and efficiently.

Analyze Key Financial Reports

To catch any discrepancies early on, take the time to study reports that showcase your progress over time. You can check the following:

  • Profit and loss reports that analyze your company’s income, expenses, and profits over time
  • Balance sheet reports that show assets versus liabilities for your business
  • Statement of cash flows reports
  • Accounts payable and accounts receivable reports, which track how much money is owed to your company and how much money you owe creditors.
  • Depreciation reports that break down the value of the assets owned by your company
  • Payroll summaries

Be Clear about Payment Terms

An often underrated small business financial tip is to keep track of your invoices. Stay up-to-date with your invoicing and inform your customers and vendors of your payment terms in advance. Follow up regularly on pending invoices so you have a steady flow of income.

When doing business with other companies, it may be an industry norm to offer credit by extending payment terms from as little as seven days to as long as 60 or 90 days. While this may work to build trust and expand your client base in the short term, it may affect your cash flow. Think about how you will finance your operational costs while waiting for payments to be made.

To avoid late payments, use strategies to encourage your customers to pay on time. For example, you could offer a discount if they pay early or charge interest on payments if they are late.

Experiment with Pricing

Narrowing down the right price is a unique challenge for business owners. You want to price your product or service high enough to raise profits. At the same time, you don’t want to turn away customers and hurt your conversions with unaffordable pricing. So how do you find the sweet spot between the two?

Start with calculating your cost per product and determine your desired profit margin. Next, analyze your competitor’s pricing in the market and factor in your unique selling point before calculating your selling price.

After all this, it’s important to remember that your pricing should not be set in stone. Pay attention to your conversion rate and consumer buying trends, and use that information to tweak your prices. Test out different pricing strategies to find the magic formula that gets you the most returns.

Establish a Line of Credit

Don’t wait till your business is in trouble to apply for a loan or a line of credit. That’s when you are least likely to receive funding. Instead, ask for financing when your business can show a solid business plan and potential for growth. That way, you can use the loan or credit for expansion or as an emergency fund, instead of a rushed rescue attempt.

Keep an Eye on Your Cash Flow

A brand new business, or even restaurants and shops, rely on cash transactions. So, tracking your cash flows daily or weekly should become an essential part of your process.

Even small cash expenditures add up over time, and the numbers can blindside you if you don’t track them. Reviewing your spending habits can help you make the right changes to cut costs and maximize profits.

Explore Different Funding Options for Your Business

To sustain healthy growth and recurring profits, your business should be able to keep up with daily operational costs, which is why you need enough working capital.

Having ready access to working capital can help you stock up for seasonal demands, introduce new technology, renovate your showroom or restaurant, and hire new employees. You can ensure that your business receives working capital when needed. These include

Bank Loans

These are suitable options for businesses that have a good relationship with their banks, with a sound credit history and collaterals. However, be mindful of the type of loans, payment terms, and interest rates before you apply for a bank loan.


With crowdfunding, you can raise money from the general public by pitching your business idea through platforms like Kickstarter and GoFundMe. Investors can either lend you the money and charge interest or ask for equity in your business. Unfortunately, while crowdfunding can attract plenty of investors, it may take a long time for you to collect the funds you need.

Small Business Grants

A major advantage of securing a grant is that you don’t have to pay it back! Governments or larger conglomerates can approve small business grants for companies with innovative ideas. On the flip side, the competition for grants is stiff, and the criteria for approval are demanding. Besides, you need to use the funds in specific ways, as detailed by the funding body, which may limit your ideas for growth or expansion.

Venture Capital

Venture capitalists will invest money into a business in return for equity. They usually help start-ups that show potential to grow so they can receive a good return on their investment. The funding may be able to take your business to new heights, but you will have to give up control over a significant part of your business in return.

Short-term Business Financing

Short-term financing is the best solution when your business has an immediate need for funds. Companies like FundKite provide business financing to small and large organizations alike. Instead of charging high-interest rates, FundKite collects a mutually agreed-upon percentage of your business’ sales, so you only need to repay the funds when your company thrives!

Funds are approved quickly, which means you have quick access to working capital that can be used to pay time-sensitive overheads like rent or salaries. Short-term financing can get you through a cash crunch or help bankroll seasonal expenses and are an effective way to keep operations running smoothly.

Evaluate and Evolve Your Business Strategy

Monitor Your Return on Investment-It’s essential to know where your hard-earned dollars are going to ensure you get the most mileage out of your investments.

Invest Time in a SWOT Analysis– Whether you are in charge of an established business or the owner of a budding start-up, a SWOT analysis is an effective method to develop and change your business plan according to the current environment. In addition, it helps identify your company’s strengths and weaknesses while recognizing opportunities and threats in the marketplace, all critical ingredients in formulating a successful growth strategy.


Navigating the highs and lows of running a successful business can be challenging for new or experienced entrepreneurs alike. Consumer behaviors and market economies are not always predictable, so you need a solid understanding of your growth plan and small business financial management. Don’t hesitate to approach experts in accounting, financial management, and taxation to measure your profits and losses accurately. Research different options while securing funding for your business, keeping it operational during the slow months, or looking for financing opportunities to grow and expand your business. Take active steps to put financial planning at the heart of your business instead of an afterthought, and get ready to take your venture to new heights!