How to Manage Your Business Finances

Managing finances can be a huge challenge for freelancers and small business owners. People don’t usually set up their own business because they love dealing with the financial side of things. More often than not, they do it because they’re passionate about their work and they want to develop their passion into something that’s even more meaningful for them.

As a result, I sometimes get asked about how to manage your business finances as easily as possible. A lot of freelancers and small business owners feel overwhelmed when it comes to their finances, so keeping things simple is often the most effective strategy, especially if you want to see results.

In this blog post, I’m sharing my top 5 tips to help you manage your business finances simply and effectively. I want to give you the resources you need to keep on top of your finances so that you can feel confident and in control of your small business.

Top 5 tips when managing finances for a small business

1) Take lots of small steps

I’m a strong believer that familiarity breeds confidence. The more you look at your finances, the more confident you’ll feel when it comes to dealing with them.

In the past, I’ve spoken in depth about the financial mindset block that a lot of freelancers and small business owners experience. Wanting to bury your head in the sand and avoid looking at the numbers in your business is completely normal. However, building familiarity with your finances can help you overcome this.

When I’m working with my mentees, I tend to break things down into small steps. I find that this makes everything so much more manageable for them.

If you’re feeling overwhelmed, I’d therefore recommend starting small and doing just one simple task towards managing your finances. You can then build on this with another task, and another, until you’ve taken lots of small steps and are feeling more confident.

Once you’ve completed those tasks and you are more confident, you’ll find that you’re better equipped, as well as in a much better position mentally, to manage your business finances.

2) Check in with your finances on a weekly basis

When it comes to building familiarity, I’d suggest checking in with your finances at least once a week.

For me personally, this involves logging into my business bank account and looking at what’s come in, what’s gone out, and what expenditure I have coming up in my budget. I always ask myself which business expenses and invoices I’m expecting to have to pay over the next week or so. This way, there are no nasty surprises, and I can make sure I have enough money in my account.

In this free download, I’ve put together a list of tasks that I think are worth carrying out each week, from recording your income and expenditure to chasing up overdue payments and tracking your time.

3) Carry out a monthly review

A monthly review takes your weekly check-ins a step further in that it allows you to learn from the data you’ve recorded each week.

For example, you can use your time-tracking data to understand how profitable a particular client is by taking the amount you earnt on projects for them and dividing it by the number of hours you spent on their work. If your hourly rate is low, you might want to raise your prices with this client or look for higher-paying customers instead.

Carrying out a review each month really gives you the opportunity to sit down, look at all your data and figures, and analyse them. This will help you to fully understand your current situation, giving you the chance to take any corrective action necessary to stop you going off course before it’s too late.

In this blog post, I show you how to carry out a monthly business review and run through the tasks that make it onto my checklist each month. These include keeping track of your goals, getting on top of your invoicing and recording your business expenditure.

4) Use software to automate what you can

When it comes to keeping on top of your finances, there are many tools out there that make managing your money simpler. Accounting and invoicing tools, such as FreshBooks, QuickBooks and Xero, are a great way to take some of the burden off yourself. They streamline processes and help you reconcile transactions and expenses.

I know that a lot of freelancers and small business owners also find creating invoices in Canva, Word or Excel time-consuming. Invoicing tools can help reduce some of the admin by both auto-filling templates and dealing with invoice management. As well as tracking when payments have been made, invoicing tools send automated payment reminders to clients and link directly to ways your customers can pay online. Not only does this make things more efficient for you, it also makes paying easier for your clients. In this blog post, you can find some of the best tools for invoicing in multiple currencies.

On top of accounting and invoicing tools, you can also consider automating certain banking processes. Your bank might allow you to automatically deduct percentages of your income from your current account so you can set money aside in savings accounts for future expenses such as taxes.

Any financial task that you are able to automate means one less task you have to do yourself!

5) Use spreadsheets and create templates you can reuse

Another thing that can help you manage your business finances is having spreadsheets and templates that you can turn to for keeping track of your finances and dealing with challenging money-related situations.

You can download my free business budgeting spreadsheet and my income and expenditure spreadsheet to help you track what’s coming in and going out of your business. Both of these spreadsheets come with full instructions and keep things simple so you can insert your numbers each time you check in.

Similarly, having a template for an email you can send to raise your rates with a client can make these situations easier and quicker to manage. When you have a template already prepared, increasing your prices suddenly becomes less scary and simpler to do because you just have to copy and paste, tweak the wording, and hit send. You don't have to worry about what you should say and how you should word it. I provide a rate increase template as part of my Charge with Confidence mentoring programme, and I know my mentees have found it so useful time and time again.

I hope these tips have given you some ideas to make managing your business finances simpler and more efficient. At the end of the day, it all comes down to gaining familiarity and then being disciplined about going in, looking at and keeping track of your finances.

If you’d like to take a small step and start digging into some of the numbers in your business, why not sign up for my free Reflect and Reset challenge? Over the 4 days, you’ll look at some of your figures from this year with a view to taking action on your goals for next year.

Sign up for my Reflect and Reset Challenge