If you are the owner of a small business, financial management is one of your biggest challenges. You have to keep track of every single penny coming into the business and every single penny going out, making sure that you have a positive cash flow and enough money to pay the bills, pay your staff, and give you a liveable wage.

But where do you start when it comes to protecting your business finances and staying out of the red? Let’s take a look.

Make sure you are paying yourself

When you are running a small business, it is easy to become engrossed in the day-to-day operations and lose sight of the big picture. In the end, the additional capital can frequently make a substantial difference in the overall success and growth of your firm. Small business owners, on the other hand, should not forget about their personal contributions to the company and should ensure that they are adequately compensated. The majority of small and medium-sized business owners, particularly at the start of their operations, neglect to pay themselves. They believe that it is more necessary to get the company up and running so that they can pay their staff. If, on the other hand, the firm fails, you will not be entitled to any monetary compensation whatsoever. It is important to remember that you are a crucial part of the company and that you must be compensated at least as much as you compensate others.

Maintain good credit

As your business expands, you may find yourself needing to purchase additional commercial property, obtain new insurance policies, and take out additional loans in order to enable all of these endeavours. Obtaining clearance for all of these transactions and acquisitions can be more challenging if your company has bad business credit. Pay off all of your debt funding as soon as feasible in order to maintain good credit. Allowing your business credit cards to carry a debt for more than a few weeks, for example, is not recommended. Additionally, avoid taking out loans with interest rates that you are unable to pay back. Only look for funding that you will be able to return swiftly and simply. Obtaining a bank guarantee is also worth looking at.

Have an effective billing strategy

Every business owner has a client who is notorious for being late with their bills and payments on a regular basis. In addition to managing small business finances, it is important to manage cash flow in order to ensure that your company is operating at a healthy level on a day-to-day basis. In the event that you are having difficulty collecting from particular consumers or clients, it may be necessary to be more strict with your finances. Having too much cash locked up in unpaid bills can generate cash flow problems, which are a primary cause of small business failure. Rather than badgering them with frequent invoicing and phone calls, try a different strategy. If you have a customer who is chronically late in making payments, which we all have, consider offering discounts to those customers who pay within a certain timeframe of the invoice being issued. And, of course, be proactive about legal action for non-payers.