September 22, 2014

8 Tips and Resources for Managing Your Business Finances

One area many business owners struggle with is keeping track of their finances, but it is one of the most important areas given that cash flow is the lifeblood of the business. Small mistakes and a lack of knowledge and resources can be costly and problematic.

We’ve selected some of the most important things to consider and provide these tips and resources.

  • Find the best local credit union. Given their frequent willingness to provide loans, finding a credit union that understands the needs of your business can go a long way. There are many online tools to find credit unions based on specified criteria. Many local credit unions require membership in an affiliated organization, often listed on their web site, but costs to join are usually minimal and well worth it. Here are a few tools to start with: Find A Credit Union, Credit Unions Online, Credit Union National Association.
  • Find a trusted mentor. Access to free help is just a click away, with sites that help connect entrepreneurs with mentors fitting their needs. Having a mentor assist with setting up finances can be invaluable if the person is trustworthy. One resource is the Association of Small Business Development Centers, which provides access to full-time business counselors around the country, often former entrepreneurs or M.B.A. graduates. Other sites for finding mentors include SCORE (affiliated with the Small Business Administration), iMantri and MicroMentor.
  • Choose the correct accounting software. While software is a mainstay of small business finance, sorting through dozens of choices isn’t easy, since there may be better options for your specific needs than the popular QuickBooks program and related packages. Find Accounting Software is a free tool that helps find exactly the right solution through a detailed questionnaire. TaxSites provides extensive resources including a list of software for small businesses.
  • Consider hiring a bookkeeper. A good, trusted bookkeeper can handle all of the mundane tasks that go along with keeping finances on track. Be sure to understand the various types of bookkeepers and how to avoid fraud. A free bookkeeper hiring test (to be taken by prospective hires) can be requested.
  • Accelerate cash flow with mobile payment systems. Mobile payment systems can allow faster and easier acceptance of payments for products and services. A system called GoPayment from Intuit allows acceptance of payments through mobile phones and can directly download the data into QuickBooks. To monitor transactions, users can access Intuit’s online Merchant Service Center to search, view and create reports.
  • Look into factoring receivables. Accounts receivable financing allows immediate payment for invoices rather than waiting 30 days or longer and tying up working capital as a result. Factoring services advance the amount of the invoice minus a “discount”, or fee (advances of 80 to 90 percent are common), and provide a “rebate” when invoices are paid – the amount depends on how long it takes the customer to pay. FactorFind provides a directory of factors specializing in small businesses. Businesses can be matched with the most appropriate factors at the International Factoring Association, BuyerZone, and Resource Nation.
  • Understand and measure capital versus operational costs. The goal often is to drive down the totals on the capital costs side of the spreadsheet and move more over to the operational side of the equation. Operating costs don’t require complex depreciation calculations and are more easily adjusted from year to year. Outsourcing is one way to do this because it sits on the operating cost side and helps to free up cash by not tying it up in capital investments (such as IT infrastructure, servers, etc.) or tasks like head hunting and payroll management.
  • Measure bottom line impact by looking at the service budget year over year. Are the costs for delivering a service going up, staying the same or dropping? Figure out how much it costs to deliver specific services to the business such as recruitment, payroll or benefits management. Understanding cost-to-serve offers the business great insight into projects and tasks, how long it actually takes to do them, and as a result how much they cost. If you want to pare back on the budget, there are hard numbers to work with that show exactly what the impact on quantity and quality of service will be if resources are reduced.

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About the Author: David Cotriss is a business/tech and new media writer, having published 500+ news and feature articles to date worldwide in magazines ranging from PC Magazine to The Industry Standard.

21 Comments ▼

David Cotriss


David Cotriss David Cotriss is a business, technology and new media writer, having published 500+ news and feature articles to date worldwide in magazines ranging from PC Magazine to The Industry Standard.

21 Reactions

  1. Great Resources! This covers just about all aspects in managing your Business Finance, consise and easy to follow.

  2. Getting the right software is the key to keeping your finances in good shape. Many of the software packages are too complicated for some small businesses and owners don’t have the time to learn all the functions.

  3. Hi David –

    This is the perfect article for someone like me — financially challenged. I love that you have so many wonderful resources all in one place. Thank you.

  4. Getting a good bookkeeper is excellent advice because most small business owners have too many other things to do and a bookkeeper is a specialist in the field.

    Mentors are also great, but make sure you’re matched with a mentor that will be brutally honest with you. A mentor should be willing to point out painful truths and then help you work through them.

  5. Nice ideas. This is one of those things that can make anyone tear their hair out. You’ve outlined a nice list of tips though that will help. I’ll be sure to pass on the free bookkeepers hiring test.

  6. David-

    Thanks for this. A wealth of resources. I can speak to picking the right accounting software. I recently made a change to a well known online version. It saves considerable time downloading transactions from my various online accounts, and over time learns how to categorize them (I verify them, of course).

    I’m bookmarking this one. Thanks again.

    -Travis

  7. David Cotriss,

    It was interesting to hear about mobile payment. When do you think that the use of old paper checks is phased out and the expression: “The check is in the mail”, i.e., you will have the money in a couple of days…, is changed to: “I will send you a SMS payment. You will have the money in a sec.”

  8. I was sure you were going to include http://xpenser.com in here. I’ve been using it for quite a while to track expenses and more recently time and finding it very convenient.

    I usually send in the expenses via email, sms, and IM, but it also supports twitter and voice. They added receipt management as well. No export to Quickbooks yet though.

  9. These are some great tips. Cash flow issues are the most common reason for business failure. Having a working business plan is a good way to manage goals and keep your eye on the ball.

    Considering factoring receivables can get you more than just fast cash. Many factors provide credit management, A/R management, collection and merchant account services.

    Economic stabilization and slow, but steady recovery depend upon the health of small businesses. For some Recession Strategies to Grow Your Business, check out three free guides at universalfunding.com.

  10. These great business tips are very necessary for any business. Following these tips, you can detect the reason of business failure and rectify it in the best possible manner. An organization must have a good business plan to manage goals and keep your eye on the ball. Considering factoring receivables can get you more than just fast cash. Economic stabilization depends upon the health of business. Check out http://www.fintel.us to know about the financial position of your business and how to increase productivity. It has helped me a lot. The business tools like scorecard, business metrics, analyzer are some of the best business tools.

  11. Hi David,
    One of the things that many small business owners struggle with is getting the right context for understanding their numbers and finances. For many of them, the numbers look like ants walking up a page.
    About ten years ago we started to developed a coloured based visual representation of a business which has developed into a FREE online diagnostic called The Financial Fence. It assembles profit and loss accounts, balance sheets and cashflows on a single page in the form of a fence. Have a look on http://onesherpa.com and with FREE membership you can get this free diagnostic to play with.

  12. I cannot comment on the entire article, as I only focused on the accounting software part. In all honesty, the resources in the links provided are totally outdated. I did not see one decent SaaS application in the list (eg Freshbooks, Outright, IntAcct, ClarityAccounting, IAC-EZ, Xpensify, Simply Accounting, Xero and more…) Desktop/ “bought in a box” applications are positively not the best option for any freelancer/ small biz looking for efficiency today. By the way, I did find the link to the test you can administer on bookkeepers very helpful – I did not know that, and I think more biz owners should do that. Thanks!

    • Hi Brandan, the term “small business” encompasses more than freelancers or sole proprietors — depending on how you define it, it can mean businesses with up to 100 employees, even up to 500 employees (according to the SBA). So you have to keep that definition in mind in this article.

      A number of the resources in this article are for small businesses that are larger than the sole proprietor level. For instance, as good as Outright is, a business with 50 employees would not be able to use Outright effectively, because Outright is designed primarily for sole proprietors.

      – Anita

  13. Good insights for those planning to start or expand an already existing small business

  14. You could always hire somebody to manage your finances for you. Doing so, however, does not ensure the safety of your finances, and puts your books in a state of jeopardy. You can never really know which financial managers are truly interested in seeing you and your business go on to bigger, better things, and who wants only to take advantage. Luckily, once you get the hang of it, you will be able to book-keep with the best of them, and will no longer need somebody else to do it for you.

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