Small business owners face myriad challenges in today’s fluctuating markets, not the least of them financial. Aside from hiring and retaining employees, attracting and keeping clients and finding time for a vacation, small business owners have to balance the books and plan for the future – all while turning a profit. We’re bringing you five tips to build and maintain a solid financial foundation for your business.
Borrow without sorrow
Many Canadian small business owners have financed their business with personal savings. This is not ideal as needs increase, since most entrepreneurs will require an additional capital source to fund growth and expansion. Any borrowing you do comes with interest so be careful to choose your loan product carefully. For example, a business line of credit usually comes with a lower interest rate than a credit card. If you need to use a credit card for the convenience, choose a business credit card with a rate you can live with and a cash back feature for the purchases you make. There are also specific loans and leases with various terms and rates to finance capital such as equipment or inventory.
Don’t let your cash flow become a cash drain
Not all business chequing accounts are created equal – the fees you pay for deposits and withdrawals can vary widely. If you have a business with high volumes of transactions, this is even more applicable to you. Those fees can add up quickly. And not all fees are transactional – there can be additional fees for volumes of cash, coin and cheques. So what do you do? Talk to your financial institution about your usage so they can help pick the best account for you. Cash management services provided by a financial institution can often minimize costs and rates while maximizing efficiency. Look for ways to save by comparing different accounts and choosing one that will be less of a cash drain. Keep that hard earned money where it belongs.
Avoid a souped-up merchant account when a basic one will do
Most retail businesses today offer point of sale payment options given that a large number of customers prefer to make purchases with their debit or credit cards instead of cash. This is great for cash management and record keeping as well. However, be sure that the merchant account service you select fits your needs in terms of services provided and fees. If your transactions are not that high, a volume-based payment plan could result in savings. In this day and age there are a lot of different solutions available, designed to fit your business specific need. Do some research and discuss your options with your financial institution.
Don’t mix personal expenses with business expenses
We understand using a personal credit card seems like an easy way to finance your business and it can become an all-too common practice. However, it’s important to keep your personal and business expenses separate. It’s why business credit cards exist. Keeping your business expenses separate will make tax time easier. It makes record keeping a breeze and your tax guy happier. It can help build up your business’s credit and make it easier to obtain other lending in the future. To top it all off, business credit cards have great rewards geared towards businesses.
Save separately for your business and your trip to Acapulco
If you are a sole proprietor, the line between your personal finances and that of your business can get blurry. However, it’s best that small business owners separate their personal savings from their business savings. This will make it easier to plan for and set funds aside for anticipated business needs, whether it’s office supplies or bulldozers. A long-term savings plan will allow you to borrow less and provide a financial buffer for your business. So save for vacations in one account, do business in another.
We’re here to help. For more information on any of the tips above, reach out to our Business Banking Team at 1.855.350.7775 or firstname.lastname@example.org