10 Essential Tips to Protect Your Online Payments

According to PYMNTS, 60% of small and mid-sized companies have cash flow challenges, often through their processes and the inability to get paid on time. 

The Federal Reserve released its Small Business Credit Survey for 2024, in which 49% of small businesses indicated struggling with cash flow variability, and 52% noted difficulty paying operating expenses. This marks the importance of financial planning. Without it, businesses may run into operational issues.

To help avoid that, this article will outline 9 financial-planning tips for small businesses. The tips will include everything from cash flow forecasting to ways to use digital tools. 

What is business financial planning?

Financial planning for small businesses is not simply about some casual cash flow tips; rather, it is a continual process that requires consistent attention from the owner. It involves identifying both short-term and long-term business and financial goals and finding ways to achieve them. 

Consider your funding options and take the time to plan strategically, as it helps you develop a better understanding of the financial challenges that will arise as your business grows.

Here are 9 money management tips that can help you as you think through the financial side of your business and move toward your business goals.

1. Keep your business goals and your personal goals separate

Many entrepreneurs find that they sometimes have their business and personal lives intertwined. This is completely natural, but at some point, it can feel overwhelming. 

Let’s think about this scenario: you are trying to decide how to use some profits to upgrade the work, but you also want to save for your child’s education. Both are valuable goals. Without clearly determining priorities, you will typically diminish one or the other.

When running a business, if your personal needs are too closely coupled with its success, you lose clarity in your decision-making. So, it is a good idea to have separate accounts for personal and business purposes.

2. Explore your financial options

Many small businesses start as bootstraps, using only personal resources to fund a business. It can be a great way to grow your business, keeping control of the pace of the growth in mind.

However, there are limits to bootstrapping as well. You’re taking a considerable personal financial risk when you use your own savings or personal credit card to pay expenses and spend money. It makes even a small setback in business that much more dangerous to your personal finances when you put all of your resources into one basket.

To lessen that vulnerability, consider whether it’s time to access outside capital in a strategic way that won’t put you in a precarious position. 

For example, small business loans, upfront money from customers, subscription-based businesses, or taking on an investor with equity are ways you can create breathing room. These can help with cash flow while growing the business without pulling financial resources away from yourself.

3. Be aware of your liquidity

It’s essential to understand that having a good balance sheet and financial well-being does not necessarily imply that you’ll be able to access cash when you need it. It’s extremely critical to ensure you’re in a position to meet your short-term liabilities, even if you have more assets than liabilities.

Certain entrepreneurs create a “liquidity team” that monitors cash flow on a daily basis. The team tracks key financial metrics daily, ensuring that all members of the organization are aware of how the company is performing. By monitoring cash flow closely, they avoid the pitfalls that come with situations that are asset-heavy but cash-light.

4. Keep a close eye on cash

The most successful businesspeople often don’t just think about profits — they pay close attention to cash flow. It’s common to see a company that’s doing well in revenue still struggling to pay its bills, mainly because the cash isn’t coming in at the right moment.

Being liquid and being profitable are two different things. Rent doesn’t wait for invoices to get settled, and your workers won’t either. Smart businesses set up systems to keep an eye on and predict their cash flow. They keep reserves, not just for safety, but also to be ready for the right investment opportunity when it comes along.

5. Tax Planning

A crucial part of your business financial planning will be developing strategies for your finances, which include defining your tax situation and how you plan to prepare for and deal with your tax obligations.

Tax planning for small-business owners is very difficult when you are trying to do it alone. You can always outsource tax planning and preparation to a tax accountant or another financial professional. This would save you time and, potentially, reduce your tax bill.

6. Business insurance and risk management

Every small business owner needs to know and manage risk, but we all know that it usually gets left until last.

It might be impossible to eradicate every risk to your business completely. Still, you can definitely reduce the risks with effective risk management, including the use of business insurance services and other relevant practices.

7. Put together a succession or exit plan

For a small business owner, thinking about their financial goals often means developing a succession plan or determining what to do when it is time to exit the business. 

These are two unique cases. In succession planning, you are handing over to a new owner. An exit plan simply refers to the time when it is right to sell or close the business. 

8. Consider your retirement plans

Whether you own a business or not, retirement plans benefit everyone. An experienced financial planner can actually assist you in creating a retirement plan that meets both your business and personal requirements.

9. Create an estate plan

Making a good, clear estate plan can be significant for your family, employees, and associates who depend on your business. It can limit your tax costs and provide straightforward instructions on the direction your business should take. 

Having an estate plan is extremely important in case anything happens and you become unable to make decisions for yourself. If you’re considering this, an estate planning attorney can certainly assist you.

Precision planning for profitable growth

Financial planning is the real need for small business owners who want to expand or just want to gain control of their business and have stability. If you are thinking about how to plan your finances, some tools and services can make this process easier, saving you time and errors.

For instance, accounting software can automate invoicing, track expenses, and have reporting functionality built in. It gives the business owner access to their finances so that they can check on them anytime and anywhere. 

Several fintechs provide an online business account that allows for domestic and international transfers, with all the features of a virtual card and online banking. These tools enable startups to manage their cash flow better and save time.