As it is, far too many small business owners struggle just to keep the lights on. While this is unfortunate, it is a fact of life as many owners are risking everything to reach their dream. Even though most small businesses fail, there are ways in which a budding entrepreneur can increase the odds of success. With that in mind here are some tips on how to make sure your small business doesn’t lose money.
Have a Good Accountant
While some will claim that accountants can only look at what has already happened in a business, a good accountant will help a business owner with more than just keeping their books in order – though this is important.
What exactly can an accountant do to help a small business owner? For starters, just keeping the books in order will help as this will give a business owner a more accurate reading of their income and expenses. From there the business owner can work with the accountant to determine the best way to structure payments or to even deal with cash crunches brought about by growth or unexpected slowdowns.
Either way taking advantage of small business bookkeeping services is the first step to making sure that you can find the sources of what is causing your business to lose money and then start to take the appropriate actions to stem the tide.
Not Using Separate Bank Accounts
This is a definite no-no, but you would be surprised how many small business owners treat their business bank account as if it is their personal account. While this makes sense, after all, it is your money, failing to separate accounts can severely complicate matters – including knowing the true cash position of your business.
The reason for this is simple, your personal bank account should be for personal expenses like food, mortgage payment, student loans, etc. While your business bank account is meant to be used for paying suppliers, payroll, and collecting payment from your customers. As mentioned, keeping these accounts separate will ensure that you know how much money your business has in the bank.
Another reason for keeping separate accounts is that there are tax implications of shifting money between yourself and your business. This is especially true if you are registered as a C-corporation to take advantage of the new corporate tax rates. For this reason, you do want to manage the money moving between yourself and your business to make sure that you don’t end up with a massive tax bill at the end of the year.
The Price is Wrong
This is something else that many small businesses get wrong – their pricing. What is shocking about this is that having the right pricing is critical to the success of a small business. After all, if your prices are too low, you risk losing money on every sale and if your prices are too high then you will be driving away customers.
What can be done? For starters, you need to know your costs. This doesn’t matter if you are running a restaurant or a law office; if you don’t know your costs, then you won’t know if your prices will cover them.
In addition, you want to look at what levels your competitors are setting their prices. This will give you an idea of their prices and where yours might fit into the market. Remember not just to think about direct competitors, also consider businesses which might be aligned to what you are doing in the minds of the customers as many won’t have the same idea of your business as you do.
However, there is one thing you want to keep in mind when auditing the prices of other businesses in your area – how are you different? In this case, you do need to take a step back and think about the ways you help add value to your customers.
The best way is to start by asking what problem are you helping your customers to solve? The answer will help to determine if you offer something which your customers can’t live without, which would mean that you are able to charge a higher price for your product or services.
You’re Not Invoicing Correctly
This might seem like a no-brainer but invoicing correctly and on-time is the best way to make sure you get paid what you are owed on-time. If not, then you risk having to chase customers for payments which could lead to problems in making payments.
Let’s face it, you’re not in business to lose money so follow these tips to make sure your business is on solid financial footing.