Financial Security: Ways to protect your small business

As a small business owner, it’s important to have a thorough understanding of your organization’s finances. Late payments, duplicate invoices, or an unexpected bill can cause cash-flow problems if you aren’t prepared for them, but it’s relatively easy to put systems in place to help you keep track of everything.

If you are new to business, or want to make changes to get yourself on a better financial footing, there are some key things you can do to protect your business and set yourself up for future success:

Build an emergency fund

When you are first starting out, it may be hard to find spare cash to put aside, but it is really important to build yourself a contingency fund. While you cannot prepare for everything, having the funds to cover slow periods and unforeseen events will give your business a much better chance of surviving.

The standard advice is to have enough in your emergency fund to cover three to six months of expenses, but any savings will give you a buffer that can take the pressure off if you need it.

Only do the work you need to

If you’re a sole proprietor or a very small operation, you can save yourself lots of time and energy by setting up automated systems to help reduce the amount of admin required to keep everything ticking over. Bill payments and banking are some of the easiest things to automate, and the less you are inputting manually, the fewer errors you will encounter as well. 

You can also save yourself a lot of time and stress by ensuring your security is up to scratch and minimizing the chances of having to deal with data breaches, hacking, or cyber-attacks. Simple changes such as using secure paper checks for your banking can dramatically reduce the chances of being targeted by fraudsters, allowing you to focus on running your business.

Set goals and work towards them

Starting and nurturing a new business is an intense experience and it can feel as though there aren’t enough hours in the day just to do the basics. However, it is important to set yourself and your business goals in order to measure your performance and ensure that your business is viable in the long term.

There may be some overlap between your personal goals and those for your business, and this can be a great motivator. Whether you want to save for your future, or just have enough for the holiday of a lifetime, focusing on where you want to be is an important part of achieving your goals. 

Your business goals might include expanding your operation, diversifying into a new product or sector, or hiring staff so that you can take a little more time for yourself. Whether you want to dominate your industry or just make enough to afford a new car, the only way to achieve your goals is to have them in the first place.

Create a budget and stick to it

Drawing up a budget is a great way to focus your attention on the finances of your business and this can go hand-in-hand with achieving your goals. In the early days, you may be happy just to keep your head above water, but as your business grows, it’s important to decide where you want to focus your investment to get the best return.

It may be more cost-effective to buy materials in bulk or sign long-term contracts with customers, but to capitalize on these opportunities, you need to have a plan. Drawing up a budget can help you identify areas where you could make more profit and combine them with your goals to make everything work together.

If you start as you mean to go on, the systems you put in place for your small business will help you to achieve the growth you want and allow you to maximize any opportunity that comes your way.