13 golden rules for managing your small business finances

Strong financial management is key to business success. Whether you’re just starting out or scaling up, following a few golden rules can help you maintain stability, make smart decisions and grow with confidence.

This guide outlines 13 top tips to help you manage your business finances successfully. 

1. Write a business plan

First, make sure you have a solid business plan in place. A business plan helps you define your idea, develop your strategy and outline the steps you need to take over the next few years. It serves as a road map for setting your goals and detailing how you intend to reach them, including what funding you might require and where it will come from. 

2. Pay yourself a salary

Many business owners don’t prioritise paying themselves a salary, preferring to invest the money back into the business. Many also choose to use their personal funds to cover business expenses. 

However, neglecting your personal finances can lead to stress, burnout and long-term setbacks. Prioritising your own financial well-being is just as important as managing your business’s finances for lasting success.

There are plenty of ways to separate your personal and business finances, including opening a business bank account. 

3. Regularly monitor your financial position

Another important step is keeping a close eye on how your business is performing. Good cash flow management is essential, so regularly review your profit and loss, and cash flow statements, so you can easily track earnings, expenses and how much cash is coming into and going out of your business. 

This enables you to make more informed decisions, helping your business grow and make more money. 

4. Explore growth opportunities

Looking into growth opportunities is essential for keeping your business competitive, increasing revenue and adapting to changing markets. It enables you to reach new customers, improve your products or services, and build long-term sustainability. Without growth, even a successful business can stagnate or fall behind.

5. Ensure customers pay you on time

Late customer payments can lead to cash flow problems. If your customers are late paying you, you might struggle to meet your own financial obligations and expenses, forcing you to rely on credit to see you through. 

That’s why it’s crucial to make payment terms clear at the start of the contract and even consider offering discounts for prompt payments, or charging a fee if customers are late. However, you must outline this fee in the initial contract and again when you invoice. 

Make sure you also have a good understanding of how the new Fair Payment Code works to tackle late invoices. 

6. Choose the right funding

Many businesses need to borrow funds to help them set up or expand – and there’s nothing wrong with that, provided you use your funding wisely and repay it on time.

Business loans are a popular option and enable you to borrow a lump sum of cash over a set term. They often have fixed monthly repayments and can come with competitive interest rates. 

However, if you’re looking to borrow flexibly, a business credit card might be more suitable. This enables you to borrow funds as and when required, and there are no fixed payments.  

Other options to consider include asset finance, invoice finance and business grants.

7. Build business credit

It’s easier to secure business finance if you have a good business credit score. Lenders consider your business credit score before deciding whether to let you borrow and how much interest to charge you. The better your credit score, the higher your chances of approval. You’re also likely to secure a lower interest rate, saving your business money.

There are plenty of steps you can take to build business credit, including paying your business taxes on time and regularly checking your business credit report for errors. 

8. Pay your tax bill on time

As we’ve mentioned, paying your tax bill on time can help to improve your business credit score. But it also ensures you avoid hefty penalty fees and interest charges. 

Accurate record-keeping is key to ensuring your tax return is correct, while knowing how much to set aside for tax means you’re not caught off guard when your tax bill is due. 

9. Use accounting software

Accounting software such as QuickBooks, Sage or Xero can help automate and organise your financial records. This can save you time and effort recording and viewing all income and expenses, as well as ensure tax returns are compliant and filed promptly. Accounting software can also help you forecast and plan for the future.

Compare costs and features carefully before deciding which package works best for your business. 

10. Build an emergency fund

Establishing an emergency fund can protect your business against unexpected expenses or periods of reduced revenue. It provides your business with a financial safety net during tough times, helping you maintain operations without taking on debt or making rushed decisions. Find out more about how much your business should have in savings. 

11. Control overheads 

It’s important to regularly review your finances to see whether there’s anywhere you could cut back or negotiate a better deal to ensure your company is operating efficiently. 

For example, you might be able to reduce your business energy bills or switch to a more cost-effective business insurance policy. 

12. Monitor stock levels

Too much inventory ties up cash, while too little can lead to missed sales. Regularly reviewing your stock helps you stay in control and strike the right balance to meet demand without overinvesting.

13. Seek professional advice

Finally, it can pay to seek the help of tax advisors, accountants and legal professionals as required. These experts can cut costs through tax-saving strategies, as well as identify risks, ensure compliance and help uncover growth opportunities you might miss on your own. Their guidance can save time, reduce costly mistakes and support long-term success.