How to Make Smart Money Decisions for Your Business

You’ve been there before – staring at a pile of receipts, bank statements, and invoices, feeling overwhelmed and paralyzed by the chaos of your business finances.

The numbers start to blur together, so you put it off. Again.

But in your gut, you know that making good business decisions begins by dealing with your finances. And that means it’s time to face this challenge head-on.

In this post, I’ve got practical strategies to help you get your financial ish together so that you can make those smart money decisions for your business.

This post contains affiliate links, which means I receive a small commission if you make a purchase using this link. For more information, see my full disclaimer here.

Prefer to listen? Check out episode 31 of the podcast.

Understand Your Financial Landscape

Smart money management starts with having a clear understanding of your financial situation.

Create a Detailed Budget

The first step? Creating a detailed budget. You can do this in a spreadsheet or a budgeting app.

Start by listing all your monthly income sources, whether it’s revenue from sales, invoices paid by clients, ad revenue, affiliate income, or any other income streams applicable to your business.

Next, categorize your expenses into fixed costs (like rent, utilities, loan payments) and variable costs (such as inventory, marketing, travel, etc.).

Be as specific as you can. You want to account for even the smallest expenses (because they add up fast). This will give you a good picture of your cash flow and help you identify areas where you might be overspending.

Once you have a budget, review it regularly and make adjustments as needed. A budget is just a plan, and as your business evolves, it’s okay to change it.

Track Your Expenses

Budgeting is only half the battle. You also need to track your actual expenses.

Consider using accounting software to simplify the process. Or you can use a financial spreadsheet if you don’t want to pay a monthly software fee. Either way, categorize your expenses as you go and reconcile your accounts regularly to ensure that you haven’t missed anything.

Tracking your expenses will help you stay on top of your spending. It will also help you identify areas where you can cut costs or negotiate better rates with vendors.

Pay special attention to recurring expenses, especially if they’re paid automatically. You may realize you don’t actually need everything you’re paying for.

Set Clear Financial Goals

Once you get a good picture of your financial landscape, it’s time to set goals.

Short-term vs. Long-term Goals

Effective financial goal-setting involves a balance of short-term and long-term objectives.

Short-term goals might include

paying off a specific debt (like a high-interest credit card)
building up an emergency fund
increasing your profit margins by a certain percentage within the next quarter or year

These types of goals give you a sense of accomplishment and motivation as you work towards your longer-term objectives.

Long-term goals, on the other hand, are the big-picture items that define your business’s future. These might include:

Hiring additional staff
Investing in new equipment or technology
Planning for your eventual exit strategy

SMART Goals

You may be familiar with the SMART goal-setting framework:

Specific
Measurable
Achievable
Relevant
Time-bound

It applies to financial goals, as well as other business goals.

For example, you could say, “I want to increase profits,” but that’s kind of vague.

Instead, say something like, “I want to increase my profit margins by 15% within the next 12 months by optimizing my pricing strategy and reducing overhead costs.” See how that’s much more specific, and it hits all five elements of the SMART framework?

SMART goals provide clarity, and they make it easier to track your progress and celebrate milestones along the way.

Educate Yourself

The business world changes constantly. That’s why continuing education is so important.

Take Online Courses

Taking online courses can help you stay on top of the latest financial strategies and best practices. Look for courses that cover topics like budgeting, forecasting, tax planning, and financial analysis.

If you’re just getting started and need a crash course in understanding and mastering your finances, check out my course, Fearless Finances. It will give you the knowledge and skills you need to take control of your finances. It covers everything from understanding key reports to implementing systems and analyzing metrics.

Read Books and Articles

In addition to courses, make a habit of reading books and articles on financial matters. Look for resources that are tailored specifically to small businesses or your industry.

Here are a few books that I recommend about finance and money mindset:

You can also subscribe to reputable financial publications and follow industry experts on social media.

Reading widely will expand your knowledge, sure. But it will also expose you to different perspectives and strategies that you might not have considered before.

Seek Professional Advice

While educating yourself is important, there’s no substitute for professional guidance, especially when it comes to complex financial matters.

Hire a Financial Advisor

Consider hiring a financial advisor who specializes in working with small businesses.

A good financial advisor can help you develop a comprehensive financial plan, optimize your tax strategy, and identify investment opportunities.

They can also provide objective advice and feedback (which is important because money matters can be emotional).

Join Business Networks

You can also look into joining local or online business networks. These communities can be helpful sources of advice, support, and resources.

They allow you to connect with other entrepreneurs who’ve faced similar financial challenges and learn from their experiences.

They’re also a great place to get recommendations for hiring skilled professionals like accountants or bookkeepers.

Automate Where Possible

I’m always in favor of automating what you can, and financial matters are no exception.

Automated Savings Plans

One of the smartest money moves you can make is to automate your savings. Set up automated transfers from your business checking account to a dedicated savings or investment account.

This way, you make sure that a portion of your revenue is set aside for future goals, emergencies, and, oh yes, estimated tax payments.

Automating your savings takes temptation out of the equation and helps you build up funds even when cash flow is tight. You can start off small and gradually increase the amount as your business grows.

Use Accounting Software

Reliable accounting software can automate many of your financial tasks. Things like:

invoicing and billing
expense tracking and categorization
payroll processing
financial reporting and analytics
Bank and credit card statement reconciliation

Accounting software can save you countless hours of tedious data entry and reduce the risk of human error. Many programs also offer powerful reporting and analytics tools so that you can get real-time insights into your financial performance.

List of financial tasks you can automate

Regularly Review Your Finances

So, we just talked about automating, and those types of systems can certainly streamline your financial management.

But you still want to review your finances regularly.

Monthly Reviews

Set aside dedicated time each month to go over your income, expenses, and financial statements.

During your monthly reviews, look for any discrepancies or areas of concern. Are there any unexpected expenses or drops in revenue? Are you on track to meet your financial goals? Use this time to make adjustments to your budget or spending habits.

But don’t just look for the negatives. Monthly reviews also provide an opportunity to celebrate your financial wins and acknowledge your progress.

Recognize areas where you’ve successfully cut costs or increased profitability. Celebrating those milestones helps you stay motivated.

Annual Review with Professionals

In addition to your monthly review routine, schedule an annual meeting with your financial advisor or accountant.

They can provide a fresh, objective perspective on your financial situation and help you identify areas for improvement. They can also point out any potential risks that you might not have noticed. And they can help you stay up-to-date with any changes in tax law or regulations that may impact your business.

During these annual reviews, you can discuss your long-term financial goals, adjust your investment strategies, and ensure that you’re taking advantage of all available tax deductions and credits.

Practice Mindfulness Around Money

Mastering the technical aspects of financial management is certainly important. But money mindset is also a factor.

Develop a Positive Relationship with Money

Your relationship with money can significantly impact your financial decisions and overall success.

Many entrepreneurs struggle with money mindset issues, such as scarcity thinking, fear of failure, or a lack of confidence in their ability to manage finances.

To make smart money decisions, you need to develop a positive and healthy relationship with money.

Practice gratitude for the income your business generates and cultivate an abundance mindset.

Reframe your perception of money as a tool for growth and opportunity rather than a source of stress or anxiety.

Use Affirmations

Affirmations can be a powerful tool for shifting your money mindset.

Start each day by repeating positive affirmations about your financial worthiness. Here are a few examples that you can grab:

I am confident in my ability to make smart money decisions for my business.
I am disciplined and intentional with my business finances.
I am capable of learning and mastering financial skills for my business.
I make informed and strategic choices with my business expenditures.
Every small step I take towards understanding my finances builds my confidence.

These simple statements can reprogram your subconscious beliefs and help you approach financial matters with a more positive and empowered mindset.

Over time, this shift in perspective can lead to better financial choices and increased success for your business.

Remember, your thoughts and beliefs shape your reality. By practicing mindfulness and cultivating a positive relationship with money, you’ll be better equipped to make good financial decisions.

Action Steps to Make Smart Money Decisions for Your Business

Now, it’s time to take action.

Pick one of the following items that makes sense for your business right now. Create a simple plan and put it into practice.

Create a detailed budget and diligently track all income and expenses. Identify areas to cut costs and increase profitability.
Review your financial goals. Are they SMART? If not, how can you reframe them?
Invest in your financial education. Pick a course to take or book to read. Or find a business network to join.
Automate as many financial processes as possible, such as savings plans and using accounting software.
Cultivate a positive money mindset through affirmations and gratitude practices. Approach your finances with confidence and an abundance mentality.

Financial success doesn’t happen overnight. It’s a continuous process. So, after you complete one action step, come back and pick another one to work on. That way, you’re always making progress.