Invoices, bank forms, tax bits, cash flow – all look fine one week, then the next it’s all a complete mess. And it’s not just something that happens to the unlucky few – Xero found that 72% of small business owners have had cash flow issues in the previous 12 months and current statistics show that poor cash flow is the leading cause of business failure and is cited by up to 82% of businesses.
As you can see, it’s not the creative side that trips business owners up; it’s the financial side. This post is going to take a look at some simple steps that can help you set goals and reduce your financial woes.
Open A Proper Start Up Bank Account
Plenty of people use their personal accounts at first, as it’s just easier. This is a big no-no. When tax time comes, you’ll be scrolling through months and months of business and personal expenditures—food shops mixed in with subscription payments and petrol receipts—and you won’t remember what you filled up.
Open a start up business account and keep it clean. It’s not about neatness – it makes you look legitimate. Clients and suppliers notice – lenders definitely do.
Build A Real Budget
Most people wing their business budgets at first. A few numbers scribbled down here and there, a few splurges on not exactly essentials but things any good business owner will enjoy. But really, this isn’t going to end well for you,
List out everything you need to pay in the first few months. Not just the obvious stuff—stock web hosting marketing—but the sneaky costs too: software traits that become subscriptions, invoice renewals, delivery charges, and anything else you forgot was due.
Then add a buffer. Around 20% should be enough for the things you didn’t budget for. That small cushion can stop panic in its tracks when something crops up you weren’t expecting or didn’t know you needed to account for.
Track Every Transaction
Everything, nothing is too insignificant if you pay for it, track it. You don’t always need fancy software, but you do need a habit. Every time money moves, you need a record of it. That’s it, from here you can start to see patterns – where you’re overspending, which client drags their feet, which products actually make you money.
If you’re not tracking, you’re guessing. A guess is what drains small business finances faster than a bad quarter.
Connect your bank account to a bookkeeping app if you can. Let it do the heavy lifting. The cleverer your records, the fewer late nights before tax season.
Build an Emergency Fund
We touched upon a 20% buffer, but if you hit a dry spell, a client pays late, or equipment breaks, this might not be enough. You need an emergency fund. It doesn’t need to be thousands, just enough to buy you time when things don’t go to plan. One month of expenses is a great start, two is better, six is the sweet spot, and for those who can, 12 months works perfectly. The State of Small Businesses Britain 2023-V2 found that the highest proportion of firms with no cash reserves at all are micro businesses, making up 12%.
Something is better than nothing and starting small and building things up will be the buffer you need when things go sideways.
