Owning your own small business is not as glamorous as it’s made out to be. Sure, you can work your own hours, but starting work at 11 am and clocking off at 3 is a far-off dream for anyone serious about growing their business. Most small business owners pull long hours and work late into the night to saving some funds for future needs.
The other common misconception is small business owners have heaps of money, but the reality is most entrepreneurs have a pretty stretched budget, invest the little extra they have back into the business and rarely save.
Why You Need to Save
Whether you own a small business with one or two employees or are a solopreneur, saving money will set you and your company up for success. Here’s why:
Improving Your Liquidity Helps You to Keep Afloat When Sales are Slow
Ebbs and flows in the market are common in all industries. When sales are slow or there is a recession, saving money will help you keep the business running. There are always fixed costs that you have to pay for, like employee salaries and rent, regardless of whether you make sales.
As a small company, you likely rely on your clients to pay you so that you can pay your suppliers. But, clients don’t always pay on time, and saving money will allow you to cover your bills on time.
Grow Your Money
Having funds in a savings account allows you to earn interest. While an ordinary savings account usually comes with a low-interest rate, it will enable you to access your funds quickly, which is convenient when you have an emergency.
It’s useful to save some money in an ordinary account so that you can access it fast, but also open another type of savings account where the interest you earn is higher, like a Thirty Day Notice or a High-Yield Savings Account. While it will take slightly longer to access money from these accounts, the interest you earn will be much higher.
Top Ways for Saving some Money
To save money, you need to find ways to cut down on your expenses so that you have money to save. Consider the following:
Get Rid of Debt
Debt is expensive, so if you have any, whether it’s a business loan, car loan, or personal loan you took to help fund your business, try to pay it off as soon as possible. The interest rate on loans adds up to a lot, especially if the terms of your loan are long.
Still, there might be times when you need a loan to meet an urgent business expense, and if this is the case, it is okay to take a small loan that you can pay off quickly.
Track Every Business Expense and Saving
You must keep a record of every business expense, regardless of how small the amount is. An easy way is to use accounting software or simply record the business expenses in an excel spreadsheet.
Doing this can save you a lot of money, as a clear record will help you to write off the maximum amount when filing your taxes.
Tracking your expenses also gives you a clear view of where the saving money is going and will allow you to find where you are overspending.
Keep Up to Date on Your Accounts Receivable and Invoices
Customers may not always pay on time, and some may not pay at all. If you don’t keep an eye on your invoices, you may not notice that invoices are not paid. To make sure invoices are paid as quickly as possible, send invoices to your customers as soon as the work is complete. This encourages customers to pay on time.
Keep a log of invoices that have been paid and send friendly reminders to customers with outstanding invoices. Depending on the value of the invoice and your markup, you may want to consider offering a discount to customers who settle their bills early.
Outsource Instead of Employ for Saving
Employees cost money. You have to pay for salaries, and office space, among other things. As a small business, you might not need the services of full-time employees. Instead of hiring full-time workers, outsource any work you may need on an ad-hoc basis and manage your expenses with pay stub generator. For example, outsource the work to an independent contractor when you need to instead of hiring a full-time graphic designer.
Usually, freelancers own any intellectual property they create, so if you want to own the work they’ve created, you must state in the contract that ownership of the intellectual property is transferred to the company.