Good financial health does not come to businesses without effort. It takes daily practice, monitoring, and discipline. The most successful business owners keep to a routine designed to grow their business and improve their accounts. To get into the best financial shape, practice these 5 habits every day:
1. Save religiously. Just like an individual, a business needs savings. It’s better to pay for large expenses with savings than by taking out loans with interest. Businesses also need savings for emergencies. Dedicate a portion of profits that will be automatically deposited into a savings account. Also plan to continually reinvest in your business. What portion of profits you decide to reinvest is up to you. Some recommend 30%, others as high as 50%.
2. Don’t mix business and personal expenses. The day-to-day accounting of a business can sometimes become muddled with personal finances. Say you have to buy some items for the break room but you pick up some groceries for your home while you’re at the store. It only takes a minute to separate the two orders and pay with different credit cards. Keep your business and personal transactions separate and you’ll save yourself a bookkeeping headache later.
3. Always negotiate. Culturally, most Americans are uncomfortable with negotiating. We pay the asking price for almost everything. If you’re not negotiating, you could be paying too much. Make it a habit to negotiate vendor contracts. They could be willing to offer you discounts for paying in cash or paying in full on delivery. You may be able to negotiate discounts for future purchases or buying in bulk. Always ask if that is the best they can do. Once you establish a fair contract, you don’t have to be locked into it. If your needs change, don’t be afraid to renegotiate your contracts and ask for better rates. Shop around and see what other vendors are willing to do. You work hard for your business’s money - don’t pay more than you have to.
4. Pay down debts. Business liabilities include loans, credit card payments, and vendor payments. The interest on your loans and credit cards can be crippling. If you pay only the minimum payment you are letting the banks maximize their return. Pay down your debts as quickly as possible. Often the interest you would earn in savings is far less than the interest accruing on your debts. If your business becomes successful, it may make sense to refinance your debt at a lower rate since there is less risk to the loaner. Constantly research credit card offers and take advantage of fee-free balance transfers to get the lowest possible rate.
5. Make learning your mission. There is always more you can learn about your business. Start with basic accounting training. JADDE Financial Solutions offers customized training based on your needs, so you can start with the basics or fill in the gaps in your existing knowledge. Learn as much as you can about your business, investing, and sales strategies. Take online courses, listen to audiobooks, and be open to constantly expanding your business education in any way possible.