5 Finance Tips All Business Owners Should Follow

I don’t know about you, but finances aren’t really my strength. I’m an entrepreneur -- a big picture guy. I like to tackle big problems and develop big visions. I don’t like to sit around staring at a financial spreadsheet while I spend hours upon hours entering expenses by hand.

But whether we like them or not, finances are a necessary part of running a small business. To get some insight on effective procedures that entrepreneurs can adopt to improve their own accounting practices, I sat down for a quick chat with LessAccounting founder Allan Branch.

Here’s what he had to say on this critically important subject:

1. Don’t procrastinate.

One of the biggest mistakes Branch sees new entrepreneurs make is that they put off their bookkeeping needs. If you aren’t financially-minded, programs such as Quickbooks can make small-business accounting seem completely unmanageable, especially if all you need to do is send out a few invoices and track a few expenses.

The problem is, of course, that if you put off your accounting work, it doesn’t go away. It just gets bigger, and eventually you’re going to be faced with an overwhelming mess that you’ll need to sort out. The bigger the mess, the more you’re likely to procrastinate.

Fortunately, though, Branch argues that small-business bookkeeping is actually very simple. If you break everything down into small categories -- categorizing expenses, paying employees, sending invoices -- the whole thing becomes much more manageable and the compulsion to put it off lessens.

2. Understand your seasonal cash flow.

Another cautionary tip Branch gives to young startups is to understand seasonal cash flow -- and that pointer comes directly from his personal experience. LessAccounting, for example, has major seasonal spikes that occur during tax season, followed by a slowing of conversions from April to October. It wasn’t an easy lesson to learn, but Branch eventually realized that he needed to maintain a three- to four-month cash cushion to help get the company through these slower periods.

You need to know your sales cycles as well. If you’re a business-to-consumer retailer that sells $20 items, your sales cycle is likely fast enough that having a cash buffer on hand is less of a concern. But if you’re a business-to-business company whose sales cycles last months, or even years, having extra capital in the bank can mean the difference between being able to weather the long periods before revenue from past sales manifests and having to fold early because your cash has dried up.

3. Focus on your core strengths.

One issue that both Branch and I see far too much is startup owners, particularly software-as-a-service providers, believing that they need to create everything from scratch. I get it. If you’ve already got a coder on your team, it can be seriously tempting to have him or her build internal apps and products rather than investing in existing solutions.

The problem with this approach is that it wastes your time. It might save you a few pennies at the end of the day, but the cash you’ll save is peanuts compared to what it cost you to take a key employee away from those activities that drive revenue for your business. Instead, it’s far more cost-effective to work with existing providers and use the tools that they’ve already perfected, rather than trying to reinvent the wheel on your own.

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