Small Business

7 Financial Tips for Your Small Business

Name: Education about how to save money in the long run by understanding the difference between 'cheap' and 'inexpensive'
Brand: Axos Bank

Aug 01, 2024

Having a successful small business isn’t just about having the right business plan or smart ideas. Knowing how to manage business finances will put you in the best position to capitalize on your business strategies.

Have a startup or looking to expand? Here are seven small business financial tips that can take your company to the next level.

1. Open a Business Checking Account

Why is it important to open a business checking account? Let’s count the ways. For starters, it helps with the image you project. Your business will now have the appearance of being more legitimate and professional. You and your employees will be able to make transactions on behalf of the business.

It also helps for tax purposes, which will be further explained in the next section.

A business bank account also gives you:

Security through limited personal liability protection
A safety net to handle financial emergencies
The ability to build credit history for your business

Make sure to look for an account with little to no fees. Basic Business Checking from Axos Bank has no monthly maintenance fees. And you get free domestic incoming wires, while many other banks charge $15 to $20 per wire. You also get two reimbursed outgoing wires per month.

2. Separate Your Business and Personal Finances

While you can use a personal bank account for your business, it’s not advised. Having a separate business bank account means you can identify personal expenses versus money you’ve spent for your company.

In addition to organizing finances for your small business, having separate accounts will make things much easier at tax time. The tax filing process will be more streamlined. It could save you the trouble of having your business and personal accounts audited by the IRS.

3. Establish or Grow Your Business With Financing

To start your business or take your established business to the next level, you’re going to need money. Here’s the good news – there are several different ways to finance your business. Options include SBA loans, venture capital, small business grants, crowdfunding, and bootstrapping.

Take your time to research each of these financing options to find the best fit for your business. SBA loans have the added benefit of a federally backed guarantee and flexible terms.

4. Tracking and Monitoring Your Cash Flow

Cash flow is the amount of money transferred in and out of your company. There are two main components – money received and money spent. To get a solid handle on your cash flow, it’s helpful to set up a tracking system.

The upgraded Axos all-in-one app makes tracking your expenses a breeze. Get a holistic view of your finances anytime, anywhere – at your fingertips. Use our calculator to determine your cash flow needs.

Closely monitoring your income and expenses can help you identify your profit margins. Tracking expenses lets you pinpoint your inventory numbers. And you can set goals for positive cash flow and profits each month.

Looking for other tips on how to improve cash flow? You can lease supplies and equipment instead of buying, open a high-interest savings account, and more.

5. Set Up a Cash Reserve

Any business finance plan should include setting up a cash reserve. Think of this as your financial safety net. You don’t want to have to pull the plug on your business if you run into problems.

Having a cash reserve can help in case of:

A sudden drop in sales and revenue
A public health crisis, such as Covid-19
Unexpected expenses

A cash reserve can help you weather these challenging scenarios so that your business survives and continues to operate. Having a financial safety net gives you time to regroup and come up with new revenue streams.

6. Consider Financial Guidance From a Professional

It’s important to realize that you won’t always have all the answers. Consulting with a financial advisor can have a big impact on the financial health of your business. Even if you have an idea about how to save on business costs, a professional can help you identify extra options.

Financial professionals can guide you through complex tax scenarios that save you money. If you are in the startup stage, a professional can help you with funding obstacles. They can also identify any errors in your budgeting and revenue projections.

An advisor can help you make important decisions about your small business finances. They can also provide a plan for your retirement.

7. Pay Yourself

Especially in the early stages, many business owners forgo paying themselves to keep their expenses as lean as possible. The key here is to remember your value to the organization. Whether you have employees or not, making sure you pay yourself reinforces that value.

But that monetary compensation goes beyond confidence and peace of mind. Think of it as another contingency plan and safeguard. If your business doesn’t succeed, you could endure a long period without ever paying yourself.

This is also a way to test the health of your cash flow. Look at the salaries on your payroll. If the data shows your salary doesn’t fit in the budget, your cash flow needs significant improvement. Take your salary and put it into savings or investments, which will grow your wealth.

Move Your Business Forward

Following these tips can put your small business in a better financial position. They can help you survive emergencies or unexpected expenses. And they can secure needed capital for startup or expansion.

Ready to put your small business in a better financial position? Axos Bank has business bank accounts and tools to set you up for success.