Whether you have a small business with a low income in its first couple of years or a large startup that’s a roaring success, being fiscally responsible will make or break your business in the long run.
There are many ways you can practice fiscal responsibility in all areas of your business: investing, saving, spending, etc. However, not everyone has a clear understanding of what being a fiscally responsible business owner means and how to implement the practices of this task. Here are some considerations for your business.
Save Some Money
Saving money as a business isn’t as easy as it seems. Formal emergency funds can be a costly choice for consumers, so most companies prefer to borrow rather than save. However, having a nest egg set aside can change the face of your business during tough times, when others are struggling and going into debt. It may not prevent you from taking on additional debt, but it can mitigate how much debt you acquire.
Instead of allocating every penny that comes through the door, assign a small percentage that will be put into savings on every paid invoice. That way, when you’re making less, you’re saving less, and as business increases your savings subsequently scale up as well.
Don’t Borrow too Much
Sometimes your business needs more cash flow to get things done, particularly during the early years when you’re still trying to make a name for yourself. In many cases, you’ll be approved to borrow more than you need. It’s up to you to be fiscally responsible and take only what is necessary to get your business on track.
When you see those extra zeroes in your bank account, it can be tempting to spend a little extra on luxury items for your business rather than the staples that you need to get by. Self-control is paramount if you have a loan, both for borrowing and for repaying it on time.
Track Your Expenses
What are you spending money on? Where is the money you earn going? Take time to put together a budget and profit and loss (P&L) tracker to keep track of where your money is going. If you see that you spend way too much money on entertaining clients over lunch meetings, change your meeting format and cut back. If you see subscription services that you don’t use adding up month-to-month, cut those as well.
Tracking your expenses makes the money you spend more tangible, especially in a digital world where we rarely hold cash in our hands. Seeing the numbers regularly will help keep you in alignment with your goals.
Reinvest in the Business
Have you ever heard the term, “you have to spend money to make money?” Well, it doesn’t mean buying the fanciest car to drive around in and impress your clients. It means putting money back into the business to help it grow and make more money. For example, you may start out with a very basic website to start building a web presence. As you become more successful, you invest in a better designer and create a website that will drive more business.
Sometimes reinvesting in your business means investing in yourself. Again, that doesn’t mean that you use company funds to buy an expensive suit and haircut to impress clients. Rather, you can put money back into your professional development, through taking new certifications or investing in a high-quality coach to help direct your goals. You may also use extra funds to pay for an assistant, so they can handle tasks while you address business growth and customer relations.
Being a fiscally responsible business owner increases your chances of success year after year. If in doubt, consult with a financial expert to get your business on track.