While there are several steps to successfully running a small business, few are as important as business banking and financial management. Without the cash in order, a venture will struggle. As a result, the U.S. economy as a whole will suffer, and consumers won’t have access to these local companies that they have come to love so much.
Therefore, entrepreneurs and business owners have to be on their game when handling finances to stay on track and keep a financial plan on track. Thankfully, there are many solutions to do just this. Here are some business banking tips and tricks for small companies:
Manage the Day-to-Day Expenses
A small business doesn’t only bring in cash. Many expenses, from office supplies to travel costs, pop up daily that require immediate attention. Finding ways to pay for these is an important step on the road to running a successful company. Business credit and debit cards don’t offer as many user protections as those geared toward consumers. Due to this, small business owners must understand the rules for paying for items daily.
For example, credit cards have to be chosen wisely. Each one provides a different interest rate, fees, and other terms. Some even offer rewards. Above all else, make sure to pay the bills on time. However, there is a difference between consumer credit cards and business ones. The former includes protections not available for corporate cards, such as limits on issuer-imposed penalty fees.
“Some card issuers may voluntarily extend some or all of these consumer protections to business cardholders, but they’re not required to, so look carefully at the terms and conditions you’d be agreeing to,” said Elizabeth Khalil, a senior policy analyst in the FDIC’s Division of Depositor and Consumer Protection.
In addition, small businesses may be more liable for unauthorized credit card use than consumers. This is especially true if cards are issued in bulk to a firm for employee use. In that case, the company may have to assume all liability in the event of a security breach.
Alternative Financial Solutions
Credit cards and debit cards are convenient, but they aren’t the only options for small businesses. Exploring alternative financial solutions can provide stability and flexibility.
- Small business loans. Traditional loans from banks or credit unions often have lower interest rates and fixed repayment terms, making them reliable choices for long-term investments.
- Lines of credit. Offering flexibility similar to credit cards, they typically feature lower interest rates and can help manage short-term cash flow needs.
- Crowdfunding. Platforms like Kickstarter or GoFundMe allow small businesses to raise capital from the public in exchange for perks or equity. This can also build brand awareness.
- Invoice factoring. Businesses can sell their unpaid invoices to factoring companies for immediate cash, improving cash flow without taking on debt.
Adapt a Mobile Mindset
While managing day-to-day expenses is important for a small business, several trends could impact operations in the near future. For instance, mobile banking is on the rise. Rohit Arora, CEO of Biz2Credit, wrote in an article for FOXBusiness that new technology is increasing interest in and prominence of this type of banking solution. Smartphones have made managing money on the go easier than ever before, and there is a wide range of applications to help users simplify the process.
Arora explained that this is widely used to check balances and statements, transfer funds, and pay bills. Better yet, some banks even offer a service where clients are notified of suspicious activity via phone. Most people nowadays—especially small business owners—want the convenience of mobile banking. There is a distinct advantage to performing these tasks anywhere worldwide, meaning employees are no longer tied to the office to complete their jobs.
According to Arora, mobile banking will continue to expand among small businesses. The demand from this segment will most likely drive the market and encourage more innovation and growth within the sector. As a result, more companies may be able to manage their finances, take out loans, and check their balances from their smartphones or tablets.
Tax Planning
Effective tax planning is essential for small business owners to stay compliant and maximize savings. By implementing proactive strategies, businesses can reduce their tax burden and allocate resources more effectively.
- Understand deductions. Small business owners should familiarize themselves with deductions, such as home office expenses, vehicle use, and employee benefits, to ensure they aren’t leaving money on the table.
- Track expenses. Keeping accurate and detailed records throughout the year makes it easier to claim deductions and reduces the risk of errors during tax filing.
- Hire a professional. Consulting a tax professional or accountant can help navigate complex tax laws, identify credits, and ensure compliance with regulations.
- Plan ahead. Setting aside funds for tax payments and estimating quarterly taxes can prevent cash flow issues when payments are due.