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The SME Owner’s Guide to Managing Business Finance

16 February 2023

, posted by 

Aldean Moch Rafli


Managing business finances is essential to ensure that your business can run smoothly and generate the profits you desire. Unfortunately, many SME owners still struggle with managing the different puzzle pieces that make up their entire business finances. 

Here is the SME owner’s guide to managing business finances effectively.

What is Business Finance?

Business finance refers to all the funding needed to start, run, or expand a business. Any business simply cannot function properly without a sufficient amount of money to push it forward. Financing can come from a number of sources, such as investments, business loans, crowdfunding, or grants.

Managing business finances is critical for SME owners as neglecting them might result in losing out on valuable tax deductions, difficulty in getting loans, and taking missteps in business decisions that lead to more problems.

How to Manage Your Business Finances?

1.  Create a separate business account

Getting your business and personal finances mixed up might lead to serious complications in the long run. It is advisable to create a separate business account so that you don’t have to use your personal credit card for business expenses or deposit your revenue into personal accounts. There are a lot of banks and financial services that offer business accounts and virtual cards for this purpose, such as Fazz Business.

2.  Pay yourself

SME owners might have the habit of putting all their revenue into day-to-day operations, as the extra capital helps with business growth. However, as you are still part of the business, it’s important to compensate yourself accordingly to keep your personal finances in check too. Even if it starts off as a small amount, having your own salary helps build your savings and serve as a backup if your business experiences financial hardships in the future. If you’re unsure how much you should pay yourself, discuss it with an accountant.

3.      Prepare necessary financial statements

Making regular financial statements keeps you informed on your SME’s financial health. Here are the three basic financial statements you should have:

Balance sheet

The balance sheet keeps track of your assets, liabilities, and equity. This financial statement helps determine if your business is able to pay its bills and obligations, and helps in deciding whether you should purchase additional assets or go for business loans.

Profit and loss statement

Also called the income statement, this report shows your revenue, expenses, and profit or loss every month, quarter, or year. It helps you see if your business is profitable. If you need business loans in the future, your potential lenders will need to evaluate this statement in deciding if you are a worthy candidate.

Cash flow statement

The cash flow statement shows how much cash is moved in and out over time, and shows the amount available which you can use to pay bills and expand your business.

4.      Keep a good business credit score

As your SME grows, you may have new needs such as purchasing a new building, new equipment, having more employees, and so on. You might need business loans to accomplish these goals. Making sure that you have a good business credit score helps you qualify for business loans, landing contracts, and minimizes the rate of your business insurance. To keep good credit, pay off your debts on time, and don’t let your credit cards run balance for too long. Be wise when taking out business loans—be sure that you can pay off the interest. Any funding that you take should be paid quickly and easily.

5.      Consider getting a business loan

Throughout the course of running your SME, you might have insufficient capital to carry out various business needs. Consider getting a business loan to boost your cash, purchase essential equipment and seize growth opportunities. Nowadays, there are many loans available for SMEs with lower interest rates and terms that SME owners can accommodate easily, and you might even go for a loan that does not require collateral for better peace of mind. As long as you have a solid business plan, financial statements, and a healthy credit score, it should be relatively easy to get a business loan.

6.      Monitor your accounts

Monitoring accounts may seem obvious, but many SME owners might still miss this important step. Set aside a day to review and monitor your accounts. This helps you get familiar with your business finances. You might also opt for using an accounting software to make things easier. Alternatively, you might consider working with an accounting professional to help you craft your business plan, manage accounts payable, and apply for business loans.

7.  Prepare a billing strategy

You might face customers or clients that have a habit of paying their invoices late. If this goes on for long, your cash flow might be obstructed. In this case, prepare a strategy on how you bill them. For example, it might be a good idea to change your payment terms, such as giving a small discount for customers who pay the invoice within a week or so.

8.      Plan for and pay business taxes

Make it a habit to set aside a portion of your monthly revenue so that you can pay your taxes. To keep it simple, treat tax payments like other operating expenses. Right now, there are many tax software platforms available online to help you pay taxes easily.

9.  Maintain and plan ahead

Maintaining the steps above consistently is as important as planning ahead to protect the financial health of your SME. By understanding the basic skills needed to maintain business finances, such as simple accounting, applying for a loan, and regularly keeping financial statements, SME owners can mitigate possible failure. Look a few years ahead on how your finances will potentially grow and how you will use your revenues to expand your business.

How to Finance a Business?

If your SME is still struggling with getting sufficient capital, there are many institutions that provide business financing. One of which is traditional banks. They are the most common source of business funding and offer term loans, business lines of credit, equipment loans, and business credit cards. 

Although they have low interest rates, it may be harder to qualify for bank financing, as they require a strong credit and a well-established business. You can also seek alternative lenders which provide fast funding or ease of applying. There are many SME lenders that offer business loans, such as Fazz Business. Depending on your financing needs, you may consider applying for a credit term loan or a revolving credit line.

Grow Fast with a High-Yield Fazz Business Account

If you have just started running your SME and worry that the minimum balance requirement and hidden fees from banks might interfere with your finances, check out Fazz Business. With Fazz, you can enjoy a business account that multiplies your capital effortlessly while allowing you to maximize your earnings by up to 2% APY with no minimum balance and zero hidden bank fees.

Open a Fazz Business Account to build, run, and grow your business with peace of mind today!


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