Behind every successful business is a responsible bookkeeper reviewing the finances and making budgetary decisions. Oftentimes, that bookkeeper is also the owner, marketing team, and Human Resources Department. Without financial stability, your company could spend a lot, go broke, and end up having to close your doors.
If you don’t have a background in accounting, you can still enjoy relative financial stability. Keep these steps in mind as you aim to take control of your business finances.
Find resources to carefully monitor expenses
The first step to becoming more financially stable is to learn what your employees and managers are spending money on. Most of the time, the amount of money that employees spend isn’t the problem, the issue is what they are spending money on.
For example, your marketing manager may have purchased a subscription to software that they no longer use. This small, recurring expense might seem negligible – but it adds up.
There are two ways to track your company expenses. You can set up a process where team members report their expenses and collect the data in a spreadsheet or internal system, or you can invest in a payment format that provides a clear view of what people spend.
One of the best ways for small businesses to manage expenses across multiple departments and employees is to utilize business credit cards. By using business credit cards, managers can easily segment spending and gain more visibility into what expenses departments and employees are incurring.
Forecast expenses and opportunities for growth
There’s an old adage that budget forecasts are wrong as soon as they are published, but they are still valuable to business owners and managers for predicting expenses and opportunities.
For example, the retail world is incredibly seasonal. Some companies make half of their income for the year during the holiday shopping months of November and December. It is essential for companies to know the ebbs and flows of their business and plan accordingly. As you might imagine, when sales increase so too will your expenses.
While taking a month-over-month view is valuable to maintain your finances, your business may benefit from year-over-year analyses. This allows you to account for unexpected changes or prepare for summer slumps or end-of-year rushes with better accuracy.
Look for opportunities for fixed expenses
While you are reviewing your planned opportunities and costs for the year, look at your expenses and see which costs you can forecast and which ones are more variable. Fixed costs are the same every month, which makes budgeting easy. If your business pays $1,000 per month in rent, you know that you will need to account for that $1,000 in your operating costs.
See if you can transition your variable costs to fixed expenses. For example, you could pay a marketing agency a flat fee instead of relying on a contractor to book a set number of hours. The last thing you want in your business is a surprise bill, and careful forecasting along with majorly static expenses will help you plan for almost everything.
Build long-term client packages
Once you have control over your expenses, the next step is to turn to your profits. While you can’t always control your income, you can develop plans that will stabilize your income in the short run.
Hair salons and spas are two businesses that often set up client packages where people buy three or four months’ worth of services at once. Customers receive a small discount for buying in bulk and the business can count on that income.
Alternatively, offering services like auto-enrollment or monthly packages (like Blue Apron and BirchBox) can secure your income levels for the months ahead.
Use the gig economy to scale your business
The gig economy has revolutionized how we hire people. While contract and freelance positions have taken over almost all industries, the vast majority of people are happy to move around and work on different jobs.
Only 20% of people within the gig economy say they would prefer full-time employment. Furthermore, many of these employees do work full-time, just for multiple people.
If you’re not sure whether you are ready to scale your business (to hire a CPA or marketer, for example), test your budget with a contractor. You can spend less than you would hiring a full-time employee and can adjust their hours based on your budget. Once you decide whether you need someone in that position you can take the risk and hire them full time.
There will always be financial disruptions that put your business at risk. However, by taking care of what you have control over and maintaining a certain level of stability, you can handle any changes that come your way and overcome most of your issues.