Essential Financial Strategies for Small Businesses

Being the boss has its perks, like setting your own schedule, full creative control, and unlimited earning potential. But it also means you have to take care of less glamorous tasks like financial accounting and payroll. With IceHrm, it's easier than ever to manage these less glamorous aspects of running a business. Capture timesheets, process payroll, and keep financial records all in one place.

Still overwhelmed by managing your business finances alone? Our financial cheat sheet and expert tips for small business owners, coupled with seamless payroll solutions from IceHrm, will empower you to navigate financial management with confidence and ease.

A Cheat Sheet of Financial Terms and Financial Tips for Small Businesses

Deciphering cash flow statements and understanding profit margins can be daunting for new entrepreneurs. And since you have so much to do, constantly looking up financial terms isn't the best way to use your time. That's why we've created a cheat sheet of small business finance terms and tips to save you time and empower you to approach your finances with purpose.

1.Income Statements

Think of an income statement as a type of financial report for your business. It provides a snapshot of your business's revenue, expenses, and overall profitability, so you can see how much money your business made or lost within a specific period of time.

2.Balance Sheets

While the income statement is a type of financial report card, the balance sheet provides the rationale for your business's financial evaluation. With a comprehensive breakdown of assets, liabilities, and equity, balance sheets show a detailed breakdown of what your business owns and what it owes. Comparing monthly, quarterly, and annual balance sheets can provide valuable insight into how your business's financial health has changed over time.

3.Accounts Payable

Simply put, accounts payable is like a credit card statement for your business. Just like a credit card statement, it contains outstanding amounts (to suppliers) for goods and services you've purchased but haven't paid in full. For example, let's say you purchased $5,000 worth of goods to start your business. Since you have to sell that inventory before you can make a profit, the supplier allows you to buy it on credit. That means your accounts payable will increase by $5,000 until that supplier invoice is paid. Keeping track of your accounts payable (and paying invoices promptly) will foster positive relationships with your suppliers and support the overall financial health of your business.

4.Expense Reports

From rent and utilities to office supplies and employee salaries, there are countless costs involved in running a business every day. Expense accounts help you keep all of those operating costs in one place. So, when you purchase something your business needs to run smoothly, you should record it in your expense account.

5.Payroll

Payroll is all about rewarding your team for their hard work. This involves crunching numbers to make sure everyone gets their fair share of wages, salaries, and bonuses, while also juggling deductions for taxes and benefits. Setting up streamlined and accurate payroll processes will help you pay your team on time and retain and attract the best talent you need to provide the best service to your clients.

6.Cash Flow Statement

A cash flow statement tracks your business's cash coming in and going out over a period of time (usually each month, quarter or year). It's like checking your bank account to see how much money you have and where it's going. Cash flow statements show how cash is created and used (including money from sales and loans), as well as expenses (like rent, salaries and bills). Just like regularly checking your personal bank account helps you understand where your money is going, monitoring your business's cash flow will help you manage your finances more effectively.

7.Income Statement

While an income statement (also called a P&L statement) sounds complicated, it's basically just a financial scoreboard for your business. Just as a scoreboard in sports tracks points scored and conceded, a profit and loss statement tracks revenue earned and expenses incurred, ultimately showing whether your business is winning or losing financially.

Small Business Financial Tips to Take the Stress Out of Your Financial Situation

If you've been stressed about your financial situation as a home improvement entrepreneur, you're certainly not alone. Dealing with your finances can be one of the most difficult tasks of being a new entrepreneur - but it doesn't have to be that way. By following these simple tips, you can manage your small business finances effectively and stress-free.

1. Separate your business and personal finances

To ensure your personal assets are protected from the financial and legal obligations of a business, you must first separate your business and personal finances. If you haven't already, set up a business bank account and credit card for business-only purposes. Not only will this minimize the risk of financial and legal problems (such as personal liability for business debts or tax complications), but it will also ensure accurate and organized bookkeeping, making it easier to manage taxes and potential audits.

2.  Pay yourself

While it may be tempting to not pay yourself until your business is financially strong, neglecting your compensation can impact your motivation and overall business performance. So instead of waiting to pay yourself a salary until you've reached certain financial goals (which will inevitably shift), consider paying yourself from day one. Even if it's only a fraction of what you hope to earn one day, paying yourself a salary will support your well-being while also serving as a sort of safety net that ensures you can weather the storm of the early years of entrepreneurship.

3.  Make payroll easier with payroll software

As a small business owner, ensuring the financial health of your employees is vital to the long-term success of your business. And with payroll solutions like IceHrm, it's easier than ever to track your team's hours and compensate them correctly. From time clocks and timesheets to automated payroll and tax filing, IceHrm simplifies the entire payroll process so you can spend less time crunching numbers and more time planning your next big move.

4. Get accounting software that tracks your incoming and outgoings.

To ensure you have the money you need to pay yourself and your team, you need to stay on top of your business's finances, which is a full-time job in itself. Accounting software like QuickBooks allows you to track your business's income and expenses without the tedious and time-consuming task of doing it yourself. Another invaluable way to free up your time and keep accurate records? Hire an accountant. While it comes at a cost, investing in someone to take on a task you may not be the best at is always money well spent in our books.

5.  If possible, reinvest in your business

While paying yourself and your team is important, it's equally important to reinvest profits in your business to grow - especially when you're just starting out. That might look like upgrading outdated equipment, expanding product lines, or investing in marketing initiatives. Regardless of what that looks like for you, reinvesting in your business is one of the most sustainable ways to achieve long-term success.

6.  Don't be afraid of business loans - when used correctly, they can help your business grow

Whether personal or professional, taking out a loan can seem intimidating. But when used wisely, small business loans can be a valuable tool to help drive growth and manage cash flow. Financing inventory, expanding operations, or investing in technology are just a few examples of how strategic use of business loans can help your business move forward. Choosing loans with favorable terms like reasonable interest rates and flexible repayment plans can help you manage your finances more effectively and set your business up for years to come.

7.  Keep impeccable records

Maintaining precise financial records, including payroll, is crucial for your business's fiscal health. Utilize user-friendly HR payroll software like IceHrm alongside dependable accounting tools to ensure meticulous record-keeping and compliance, safeguarding the integrity of your business finances.

Keep on top of your small business finances

Keeping your small business finances on top isn't just a smart move, it's a critical factor in long-term success. By taking the time to learn key financial terms (or picking up this cheat sheet) and using these small business finance tips, you'll be one step closer to managing your finances with ease.

Start streamlining your processes, tracking your expenses, and maximizing your profits with IceHrm.