Are You Managing Your Small Business Finances Effectively?

By Kimberley Borgens

How are your finances in your services-based business doing?

Are you making the kind of money you thought you would be making in your service-based business?

How much money do you need to pay your bills?

Have you taken the time to sit down and write down (or put in Excel) all the costs it takes to run your business? Your expenses, your supplies, memberships, insurances, and so on. You want to think about all your bills for the year broken down into a monthly price to be putting in your budget. On a quarterly basis, you want to add anything new that has come up to your monthly expenses.

Knowing what you need to be making each month is important. You wouldn’t want to get in your car to drive to a destination without knowing what that destination is. If I know that my monthly expenses are $5000 a month then I have to make sure that my goal for the month is to at least get that 5K to make sure my expense are covered. I break that down into weekly goals so by this example my goal would be $1154 per week. If I don’t get that each week then I know the next week I have to make up the difference.

The next thing that I look at is “How many clients do I need in order to make that goal happen?” If I need $5000 and you are charging $100 per hour then you will need to get 50 clients to purchase 50 hours of your time. Now you know what needs to happen to keep your finances flowing to get your bills paid.

Are you setting money aside for your taxes?

Here in the USA, we have to pay taxes as business owners. Don’t put any negative energy into it. Look at it as normal operating costs for your business. Put money into a separate savings account every single month to prepare for you to pay your taxes. Reach out to your CPA to get an estimate for your taxes to get you started. If they recommend an amount, let’s say $2000 then you know that you have to divide that 2k by however many months are left in the year and that is what you want to set aside. You don’t want to wait until you have to pay your taxes to try and come up with the money. Plan ahead for this expense that you must pay. A little each month is a lot easier than a lump sum. Then if you end up getting a refund then that is a bonus and you can utilize some of that money for equipment replacement, repairs, or upgrades in your business. I would much rather be ahead of the game when it comes to taxes than struggling because I wasn’t willing to put a little aside.

Are you hiring professionals to make your life easier?

Often as small business entrepreneurs we want to only pay the lowest price for the support we need. And in many cases, it is exactly the kind of service we get – low-quality support! Then we get upset because we spend money with no real solution and that in turn stops us from hiring others to support us. “It is easier to do it myself” and “I don’t want to babysit people when I hire them” are statements I often hear after people have consistently hired people who are non-professionals.  Be willing to hire a professional CPA even if it is only for yearend taxes and utilize a bookkeeper for your monthly support. Hire professional tech support and get it done right the first time. Hire a professional because they will do it quicker, effectively and will help you learn what else you need to quickly. By them doing it quicker and more efficiently than a cheaper beginner you actually end up saving money and time getting it done correctly the first time. There are things in your business that hiring a beginner works just fine and that is okay to do. Make sure that your finances are not one of them. Your money, taxes, and accounts receivable and payables should be looked after well.

Are you asking for what is already yours?

I have worked with many clients who are challenged with asking for what they have already earned. My coaching clients pay upfront before the services are given, so for me, this is not an issue. If you, bill with 30-day terms or your client is paying you monthly for services then you want to make sure you are getting paid. If you have done the work and they are not paying timely then it is your job to be the collection agent. Pick up the phone and call them. Do not front them the money and let it carry over. In my security business, we have net 30 days in place. Pay within the 30 days and we all win. Pay between day 31 and 89 late fees are incurred. At day 90 we cut off the service until you get a payment. Why is this important to you? If you are not asking for what is rightfully yours because they made an agreement to you for those terms then you are struggling to make ends meet and you have control of this. Don’t do any favors for someone and you still lose. Call them, get their credit card information, and get paid. Maybe this month you had really great sales so it is no big deal if someone else is behind a bit. Please stop thinking that way. It is important that every client pays you on your time agreement. Then you get to take that money and put it where you want to manage it. You can put that in a retirement account and make interest off of that. You can put that money into your savings to pay your taxes. You get to be in charge since it is your business anyway. Get what you are owed and keep in mind that if someone made an agreement with you and they are not sticking to their side then cancel service and if they don’t pay you by the end of the year then have your accountant write it off in your taxes. That is only after you have exhausted all other opportunities to collect.

Kimberley Borgens

About the author

Kimberley Borgens was married at 18, a mother at 19, and divorced at 20, she has journeyed from being a single mom on welfare to recognizing her strengths, fighting for what she believes in, and successfully building 5 thriving businesses with hundreds of employees and million-dollar budgets. Kimberley is a speaker, business mentor, and coaches her clients to transform their small business into a thriving business. Kimberley is living her own legacy as she inspires and motivates women to be fearless, become more like a CEO of their business and life, and enjoy the freedom they've dreamed of. She knows what it's like to start from nothing and build a strong solid business and she can help you too.

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