An effective financial management system is the backbone of any organization, large or small. Without it, even lucrative businesses cannot succeed. Planning your finances allows you to identify both short-term and long-term financial objectives and create a strategy to achieve them. Let’s look at some ways to manage your business finances effectively.
Tip # 1: Monitor Expenses Regularly
A business with a positive cash flow has more money coming in than going out. Although profits are essential for your business, you should also keep an eye on how your cash is being spent.
The solution is to manage your expenses daily to avoid being shocked when you discover your charges exceeded your income at the end of the month.
Keeping track of your business costs will also enable you to see where your money is going. This can serve as your benchmark for determining whether or not you are on target.
Monitoring your spending lets you keep costs down, track what you spend, and identify your spending habits. If you look at these numbers daily, you can figure out how your budget is doing. Knowing how your money is spent will help you determine where you are overspending and make adjustments.
Ecommerce Expense Tracking Made Easy
Use software to simplify your transactions. QuickBooks allows you to track business transactions. QuickBooks Online also allows you to connect your bank accounts and credit cards. Through this feature, you can classify and add transactions, such as payments and deposits, so you will never miss a transaction.
Take Care of Your Bills
Avoid paying fees and damaging your credit score by paying your bills on time. Keep track of your outstanding bills in one place to stay organized for future payments.
Organize your bills in folders according to their due dates. In this way, your statements are not overlooked and mixed up with other documents.
Organize electronic bills into digital folders by month and year, then categorize by type of bill. Create an electronic file for utilities and business credit cards. Make sure to review your account for any discrepancies before making a payment.
After making your payment, save a copy or screenshot of your payment receipt in your digital folder. You might need this in the future for filling a dispute or for tax purposes.
Spend 30 minutes each week organizing your business bills. It will give you a better insight into your finances.
Use Online Bill Pay for Your Payments
It takes 7-10 business days for checks to arrive and be posted by mail. Additionally, there is a possibility of losing email. Online bill pay makes paying monthly bills a breeze. You can even set up recurring payments so that they go out on the date you specify each month. The best part is that most banks don’t charge for this service!
The advantage of electronic payments is that you can eliminate unnecessary paperwork and take payments directly from your business account. During your weekly bill inventory, verify that automated payments have been made, confirm that your balance is adequate, and record your payment confirmation numbers.
Tip # 2: Pay Yourself
As an e-commerce business owner, it’s tempting to put everything into the business. A little cash upfront is always good for a company, which is why many entrepreneurs hesitate to pay themselves.
Even if you’re starting and relying on your savings, paying yourself right from the start provides advantages you don’t want to miss. There are also tax advantages to paying yourself. Find out if you are eligible for any benefits by consulting your accountant.
It feels rewarding to be paid for your work, regardless of the amount. Set yourself a modest but consistent salary in the early stages of your e-commerce business. If you do, you could save money for personal use and a future business venture.
Tip # 3: Separate Personal and Business Finances
E-commerce business owners should keep separate records of their personal and business finances. Under the law, your business is a separate entity, and there are several risks you may encounter by intertwining your finances. Separating your finances helps you maintain accurate bookkeeping and protect your assets.
Maintaining an accurate record of your e-commerce business’s financial transactions is crucial for tax purposes. Ensure your business finances are in order and that your personal expenses are not included in your business books.
Business owners could sometimes charge company expenses from personal accounts while others use their business accounts to pay for personal expenses. With many transactions intertwined on your account, it will be tough to evaluate your company’s profits and expenditures.
Keeping business expenses separate is also beneficial because basic business expenses are eligible for tax deductions. Combining personal and business expenses may result in missed tax deduction opportunities due to erroneous records.
Protect Your Finances
Having personal – and business-related finances mixed up can lead to financial losses. If someone sues your business, then anything you have under your name is at risk. Keeping a separate record of your business’s finances will help you protect your personal assets.
Set up separate accounts for your e-commerce business. Conduct transactions through your business account. Use one account for payments, purchases, and transfers from customers. By segregating your expenses, you will be able to manage them better.
Tip # 4: Take Control of Your Marketing Strategies
Businesses depend on marketing to maintain lasting and ongoing relationships with their customers. It is also time-consuming and expensive. It would be best if you directly influenced your business’ marketing efforts. It is the heart of your business, and you need to know what you hope to accomplish through it.
You do not need to do all the marketing yourself, but you should know the key indicators of success when marketing your e-commerce business. Here are a few tips to reduce marketing costs.
Focus Only on Highly Successful Strategies
Businesses could spend so much money on marketing, but is it working? Check your results and find out which marketing channels are generating the most sales for your business.
Don’t waste money on a marketing channel that isn’t bringing you good results. If you are spending too much on Google Ads, yet your data suggests you get the most prospects from social media campaigns, your efforts should be focused on boosting your social media strategy.
Make Word-of-Mouth Marketing Work for You
A word-of-mouth marketing strategy is encouraging delighted customers to spread the word about your business. The primary purpose of word of mouth marketing is to ensure that you resolve your customer’s problems and make them so happy that they will recommend your products or services to their friends, family, and colleagues.
Increase the effectiveness of word-of-mouth marketing by asking your customers to recommend your business to their friends and family. Clients are more likely to be confident in your company if it was recommended by someone they know and trust.
A good strategy is to ask previous customers to share your content on social media. To encourage more people to promote your business, offer free products or promotional gift certificates that can be redeemed at your online store.
Boost Social Proof With Affiliate Marketing
Social proof boosts a company’s credibility because customers are the primary source of evidence. As traditional advertising is declining in popularity, social proof is becoming more powerful at influencing customers’ purchase decisions and making them feel more confident about their choices.
Leverage the power of social proof along with affiliate marketing to generate more testimonials for your business. Develop an affiliate marketing program for your customers and other influencers who have the same audience as your business. Motivate people to join the program with an attractive incentive.
You can also use this campaign to generate more social media attention for your brand. Encourage your affiliates to post testimonials regarding your business on social media. Social media mentions will increase your website’s traffic. It will also help you build brand recognition for your company.
Tip # 5: Consider Business Financing
A company’s financial goal is to ensure you have adequate funds to operate and make wise financial decisions. Financial resources should allow short- and long-term investments while preventing cash flow problems.
A significant amount of funding is needed by every business. Short-term loans can cover overhead expenses while your earnings are low, so your company remains financially viable.
Don’t delay seeking a loan until your business is in trouble before applying for it. A common oversight is seeking a business loan when your business is already in financial difficulty. Your chances of receiving financing are lowest at this time. It is advisable to apply for a business loan when your finances are in good shape—this way, the funding from the loan can be used to expand your business.
Evan Bleker is the founder of Etail Express; a company focused on providing excellent bookkeeping services for internet retailers. Evan’s history of starting and running web businesses gives him a unique owner’s perspective when giving top-rate business support services. His experience with starting and running web businesses goes back over two decades and has helped shape him into a strong team leader and internet marketer. Evan is also a skilled investor. In his free time, he manages an investment community focused on helping small retail investors quickly and easily identify high-quality net-net stocks. He’s been published in Forbes, ValueWalk, SeekingAlpha, Nasdaq.com, plus CMC Markets, and recently published Benjamin Graham’s Net-Net Stock Strategy through Harriman-House.