Stress-Free Finance Tips for Small Businesses

Being the boss has its perks, like setting your own schedule, full creative control, and unlimited earning potential. But it also means handling less glamorous tasks like financial record-keeping and processing payroll. With Homebase, managing these not-so-glamorous aspects of business ownership is easier than ever. Track timesheets, process payroll, and keep financial records all in one place. Still feeling a bit stressed out by your DIY approach to business finances? Our financial cheat sheet and finance tips for small business owners will have you managing your finances with the confidence of a seasoned pro.

A finance terms cheat sheet and financial tips for small businesses

Deciphering cash flow statements and understanding profit margins can be daunting for new business owners. And with so much on your plate, constantly looking up financial definitions isn’t the best use of your time. So, we’ve created a cheat sheet of financial terms and tips for small businesses to save you time and empower you to tackle your finances head-on.

1. Income statements

Think of an income statement as a financial report card for your business. It offers a snapshot of your business's revenue, expenses, and overall profitability so you can see how much money your business generated or lost within a specific timeframe.

2. Balance sheets

If income statements are akin to a financial report card, balance sheets provide the reasoning behind your business’s financial grade. With a comprehensive breakdown of your assets, liabilities, and shareholders' equity, balance sheets show a detailed breakdown of what your business owns and what it owes. Comparing monthly, quarterly, and annual balance sheets can provide valuable insights into changes in the financial health of your business over time.

3. Accounts payable

In the simplest of terms, accounts payable is kind of like a credit card statement for your business. Just like a credit card statement, it includes outstanding balances owed (to vendors) for goods and services you’ve purchased but have yet to pay in full. For instance, let’s say you needed $5,000 worth of inventory to start your business. Since you need to sell that inventory before you can turn a profit, the supplier allows you to purchase it on credit. That means, until this supplier invoice is settled, your accounts payable will increase by $5,000. Staying on top of your accounts payable (and settling invoices promptly) fosters positive relationships with your suppliers and supports the overall financial health of your business.

4. Expense accounts

From rent and utilities to office supplies and employee salaries, running a business comes with countless day-to-day costs. Expense accounts keep all of these operational costs in one place. So whenever you purchase something that your business needs to run smoothly, it should be included in your expense account.

5. Payroll

Payroll is all about compensating your team for their hard work. It involves crunching numbers to make sure everyone gets their fair share of wages, salaries, and bonuses, all while juggling deductions for taxes and benefits. Establishing streamlined and accurate payroll processes helps you pay your team on time, and retain and attract the top talent you need to provide the best service for your customers.

6. Cash flow statement

A cash flow statement tracks the money coming in and going out of your business over a specific period (typically every month, quarter, or year). It's kind of like checking your bank account to see how much money you have and where it's going. Cash flow statements show how cash is generated and used (including money from sales and loans), as well as expenses (like rent, salaries, and bills). And just like regularly checking your personal bank account helps you understand where your money is going, keeping tabs on your business's cash flow will help you manage your finances more effectively.

7. Profit and loss statement

While a profit and loss statement (commonly called a P&L statement) sounds complex, it’s essentially just a financial scoreboard for your business. Just as a scoreboard in sports tracks points earned and conceded, a P&L statement tracks your revenue earned and expenses incurred, ultimately revealing whether your business is winning or losing financially.

Finance tips for small business to destress your financial DIY situation

If you’ve been stressing about your DIY financial situation, let us start by saying you're certainly not alone. Navigating the ins and outs of your finances can be one of the hardest parts of being a new business owner—but it doesn’t have to remain that way. By following these simple tips you’ll be able to effectively manage your small business finances, without the stress.

1. Separate your business and personal finances

Ensuring your personal assets are protected from the financial and legal liabilities of business ownership starts with keeping your business and personal finances separate. If you haven’t done so already, set up a business account and credit card exclusively for business purposes. In addition to minimizing the chances of facing financial and legal challenges down the road (like personal liability for business debts or tax-related complications), this practice also promotes accurate and organized record-keeping, making it easier to manage taxes and potential audits down the line.

2. Pay yourself

While it can be tempting to forgo paying yourself until your business is financially strong, neglecting your compensation can affect your motivation and overall business performance. So instead of putting off paying yourself a salary until you reach certain financial goal posts (that will inevitably move), pay yourself from day one. Even if it’s a fraction of what you hope to someday make, paying yourself a salary supports your well-being while serving as a safety net of sorts, ensuring you’re able to weather the storm of those first few years of entrepreneurship

3. Make payroll easy with a payroll software

As a small business owner, ensuring the financial health of your employees is crucial to the long-term success of your business. And payroll solutions like Homebase make it easier than ever to track your team’s hours and accurately compensate them for their time. From time clocks and timesheets to automated payroll and tax filings, Homebase simplifies the entire payroll process, so you can spend less time crunching numbers and more time plotting out your next big move.

4. Get an accounting software that keeps track of your incoming and outgoing

To ensure you have the cash to pay yourself and your team, you need to have a strong handle on your business finances as a whole, which is a full-time job on its own. Accounting software like QuickBooks allows you to track your business's income and expenses without the hassle or time-suck of doing it yourself. Another invaluable way to free up your time and maintain accurate records? Hiring a bookkeeper. Although this comes at a cost, investing in someone to manage a task you may not be the best at is always money well spent in our books.

5. When possible, reinvest in the business

While it’s important to pay yourself and your team, it’s just as important to reinvest profits back into your business for growth—especially when you're just starting. This can look like upgrading outdated equipment, expanding product lines, or investing in marketing initiatives. Regardless of what this looks like for you, reinvesting in your businesses is one of the most sustainable ways to fuel long-term success.

6. Don’t be afraid of business loans—when used properly, they can help your business grow

Whether personal or professional, taking out a loan can be intimidating. But when used wisely, small business loans can be valuable tools for fueling growth and managing cash flow. Financing inventory, expanding operations, or investing in technology are just a few examples of how strategic use of business loans can propel your business forward. By choosing loans with favorable terms like reasonable interest rates and flexible repayment schedules, you manage your finances more effectively and set your business up for success for years to come.

7. Keep impeccable records

Keeping meticulous records of your financial transactions, including payroll and accounting statements, is key for the financial well-being of your business. By utilizing user-friendly tools like Homebase for payroll management and reliable accounting software for accurate record-keeping and compliance, you can rest easy knowing your business's finances are in good order.

Stay on top of your small business finances

Staying on top of your small business's finances isn't just smart business—it's a crucial ingredient for long-term success. By taking the time to learn essential financial terms (or keeping this cheat sheet nearby) and leveraging these financial tips for small business owners, you’ll be one step closer to navigating your finances with ease.

Start streamlining your processes, tracking your expenses, and maximizing your profits with Homebase.