Small Business Financial Strategy Tips for Success

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How you manage your finances, as well as how you plan for future growth, are the cornerstones of a successful business.

But if you’re like many entrepreneurs, you haven’t given much thought to a financial strategy. You may be so bogged down in the day-to-day tasks of running your business that you haven’t thought about what you need to do to be successful in the future.

This is where a financial plan comes in handy. It can help you make the most of your working capital and find financing when you need it to grow.

Why a financial strategy is essential to the success of your small business

What you do in your business will have an impact on it in a year, in five, even in 10 years. This is why having a successful business and financial strategic plan is so important. Without it, you risk spending your time putting out fires and managing day-to-day operations without really seeing the big picture, and your business may stagnate rather than grow.

Let’s say you want to increase your income by 30% over the next two years. How will you do this? You may need to hire additional salespeople or raise prices. It all comes down to your financial strategy.

And if growth is your goal, you may need to plan on buying commercial real estate. While you may not be able to afford to spend $1 million on an office building today, with the right cash flow management and credit building strategies, you can set your business up to it will be able to take out low-rate financing in a few years.

Bottom line: Having a financial strategy helps you navigate your way to success.

Small Business Financial Strategies to Strengthen Your Business

Now let’s dive into some of the strategies small business owners can use to grow their business.

Establish good financial habits from the start

If you’ve just started a new business, it’s important to prepare your business for financial success from the start. Invest in accounting software and open a business account to separate your personal and business finances.

As a new business, you might not qualify for certain types of financing from banks and SBA lenders, so work to build your credit by opening and using business credit cards responsibly.

Set up a payment policy

Late paying customers can really hurt your business cash flow. This is why it is important to establish a policy indicating when invoices are due. Consider charging late fees to encourage customers to pay on time, or offer a discount if they pay early to maintain your liquidity.

Make it easier for customers to pay by automating your accounts receivable processes as much as possible. Accepting debit and credit cards, as well as bank transfers, lets you get paid digitally so you don’t have to wait for a check to come in the mail.

Hire help

Even a small business can benefit from bookkeeping help, especially if you don’t have the time to update your accounts regularly.

You can hire a part-time accountant, CPA, or bookkeeper to make sure your business expenses are filed appropriately, send invoices, check for late payments, and even file your taxes.

The time you save not having to manage your business finances is time that you can reinvest in running your business.

You might also consider hiring a financial advisor who can help you establish your company’s financial goals and determine the best way to achieve them.

Understand your financial statements

Items such as cash flow statements, balance sheets, and profit and loss statements may seem complicated and look like something your accountant should deal with, but it’s important for you as a business owner to understand your own financial statements.

These statements tell the story of your company’s financial well-being. Reviewing assets and liabilities, cash flow, or projected sales paints a picture of where your business is and where it’s heading so you can make decisions to course-correct if necessary.

Constantly monitor your credit

Even if your business isn’t new, it’s important to keep an eye on your personal and business credit. If you haven’t yet established credit for your business, spend some time learning how to establish business credit, as some lenders look at your scores to determine whether or not to extend financing to you.

Make sure there are no discrepancies in your credit reports. If they are, report them immediately, as they can negatively affect your credit. Work to boost your credit scores by paying off your debts and making payments on time each month.

The higher your credit ratings, the lower the interest rate you will be entitled to if you ever decide to take out a loan.

Consider your financing options

Whether you need a cash injection right now or not, someday you may need it. Maybe you want to buy another business in a few years, hire more help, or increase your marketing spend. Don’t wait until then to research your options and find the type of small business loan or line of credit that’s right for you.

If you’re running a startup, consider venture capital as well, but be aware that any investor will own some equity in your business and may want to participate in the decision-making process.

How to create a financial strategy for your small business

We’ve covered some tactics you can use to lead your business to success. Now, let’s incorporate this into a financial strategy.

If you haven’t created a business plan yet, now is the time to do so. There are plenty of free templates available online, so use one as a starting point. In your business plan, describe your business goals and how you will achieve them. Leverage those financial statements that you are now an expert at deciphering.

Once you’ve finalized your business plan, don’t put it in a drawer and forget about it. It should be a living, breathing document that you update as your business evolves.

Successful entrepreneurs know they need to look beyond the short term to develop a business strategy that provides for the long-term financial health of their business.

This article was originally written on January 14, 2022 and updated on January 24, 2022.

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