3 Essential Financial Management Practices for Small Business Owners

Getting your small business where you want it to go takes meticulous planning and a ton of hard work. You have to be careful about how you use your resources and the steps that you take to achieve growth. Here are a few simple but important tactics that could help you make your growing company more resilient against financial ups and downs while you work towards boosting your profits.

1. Research Strategic Funding Opportunities 

As you need to bring in more capital to support your company’s development, don’t default to the quickest and easiest funding source that you can find. In particular, avoid racking up high-interest charges on a business credit card to make major purchases. If it’s going to take you a while to pay down the balance, you could wind up incurring exorbitant interest charges. 

Look online for alternatives to traditional credit and lending options. The online marketplace is a great place to find unique lending programs for business owners who have less access to funding solutions than some of their competitors. There are lending and grant opportunities available to business owners who are minorities or live in rural areas. You can also find veteran business loans online that offer better long-term manageability than many typical financing models. If you qualify, this resource could give you the capital you need to ramp up your operations and afford value-adding assets that are going to help you grow your company. 

2. Build and Monitor Credit

Creditworthiness is crucial to your ability to access funding opportunities. When your business is plagued by a lousy credit score, you won’t find many financing providers that want to work with you, and those that are willing to may subject you to high interest rates to counter their risk exposure.

To build business credit, be consistent about paying expenses on time. Try to use less than thirty percent of your available credit on individual credit accounts, and also try to use less than thirty percent of your aggregate credit from the aggregate of all of your accounts. Requesting increases to your credit limit might be a quick and painless way to get to a better credit utilization ratio without having to start spending less right away.

Keep a close watch on your credit score so you’ll be able to monitor how much your credit-building efforts are paying off. Staying attuned to changes in your score can also alert you to errors and give you the opportunity to correct them as quickly as possible.

3. Manage Risk Responsibly

After you’ve worked so hard to start your business and position it for growth, it is extremely important that you take the right steps to protect what you’ve built. Commercial insurance packages are a vital tool for small business owners because they equip them to handle situations that would otherwise be insurmountable. A typical liability claim, for instance, could be more costly than your entire operating budget. Furthermore, a major loss of a key asset due to a fire, theft, or severe weather event could put you at a serious disadvantage. The loss of certain assets might even prevent you from operating and continuing to generate a profit. 

Be sure to protect your business against liability and loss with commercial insurance coverages. The right coverage elections for your business largely depend on the type of work that you do and the value of your assets. Be aware that maintaining certain threshold coverage limits might be legal or contractual requirements. Also, keep in mind that your coverage needs are going to change over time. As your business grows, the scope of your risk exposure may grow in equal measure.

Ultimately, a forward-thinking approach to managing your business’ finances will help you stay on a solid track for growth. Equipping your company with a formidable credit score, avoiding problematic financial obligations, and establishing smart contingencies with insurance coverages will all support your long-term goals.