Essential financial practices for growing your small business

Small business growth can be challenging and rewarding in equal measure. To business hopefuls, the UK market can seem dreary; 2024 reports showed a 30-year high of company closures. Yet, with the proper financial practices, your business dreams remain realistic.

 

Here’s the thing; personal and business finances should never overlap. These are the essential practices that every small business owner should know to promote growth.

 

Separate personal and business finances

It can feel challenging to separate yourself from your business — after all, you’re investing huge amounts of hours and finances. Chances are, your small business is bordering on becoming synonymous with your identity.

 

But if growth is your goal? It’s time to establish some financial distance. Open a business bank account and invest in separate credit cards, and optional expense cards for employees. This keeps budgeting simple and streamlines bookkeeping and tax filing. You’ll thank yourself each April.

 

Track cash flow closely

As a small business, cash flow is lower than most major corporations, but equally, you have fewer eyes on the ball. It’s a tricky catch-22.

 

Set aside time to monitor your income and expenses, ensuring sufficient cash to fund operational costs. If possible, invest in automated software to track these figures without draining your time. If not, schedule biweekly check-ins and manually structure a cash flow forecast.

 

Budget and plan for growth

Budgeting is key. With figures changing so fluidly, it’s vital to regularly revisit monthly and quarterly budgets — accounting for marketing, inventory costs, and emergency funds. Always have a three to six-month cash reserve for rainy days; you never know what’s around the corner, and small businesses have fewer investors to fall back on.

 

Adequate insurance is extremely valuable, especially for property damage. However, equally, plan for the best, not just the worst. Growth isn’t cautious, after all; forward-thinking is essential. Future investments like expansion and equipment are worth factoring into long-term growth plans.

 

Minimise debt and manage credit wisely

Debt is a double-edged sword. Establish the difference between good and bad debt, and educate yourself on the strategic use of business loans. Always avoid accruing debt without having a clear pathway towards managing it.

 

In the meantime? Small business owners should prioritise achieving (and maintaining) a strong credit score. This sets the stage for any future investments and growth opportunities.

 

Save for taxes and unexpected costs

Saving for tax is non-negotiable and fundamental to running any successful small company — let alone growing one. Yet, failing to set aside a proportion of profits is a common mistake among inexperienced or ill-advised business owners.

 

Want to take things one step further? Don’t just set aside the minimum. Be aware that upfront tax payments for future quarters are occasionally requested. Save liberally to avoid unexpected surprises.

 

Pave an exciting future of growth for your small business; it all begins with basic financial practices.