Managing business expenses isn’t easy. Taxes, utility payments, supplier invoices, store or facility maintenance, employee salaries and benefits are just some of the costs that small business owners need to stay on top of. Over time, it becomes easier to fall behind on payments or mismanage business expenses.
To help small business owners more manage their payments more effectively, here are a few essential pointers:
Avoid using cash
There are situations where it makes sense to pay bills in cash. For instance, Houston Chronicle contributor Al Bondigas advised that cash payments can make sense for smaller purchases, or if there is a sudden or urgent need for money. As a general rule, however, it’s in a small business owner’s best interest to make the majority of payments directly through a checking account, or even with credit. This helps to build a paper trail, which is important for later payment verification and future tax write-offs. Using credit and then making on-time payments is also a great way for small businesses to improve their FICO scores.
Keep business and play separate
In cases where there is a sole proprietor to a business, there’s a bit of wiggle room when it comes to keeping personal and company expenses separate. However, Entrepretunity contributor Eric J. Nisall highly recommended that wherever possible, small business owners draw a very clear line between personal and business expenses. In any event that there is overlap, Nisall suggested “Writing a check to yourself in the form of a distribution.” Muddling the line between person and business expenses can result in income tax liability shifts down the road, which can be a real headache – or if times are tough, much worse.
Consider automating your payment schedules
The topic of automation is somewhat dicey. The immediate benefit of signing for automatic bill pay is that you essentially eliminate the risk that you might miss a payment out of sheer oversight. This helps you to avoid late fees, simplifies management of overhead expenses and creates an opportunity to improve your company’s credit. However, it’s important that if you do this, you manage your company checking account more closely. Nerdwallet contributor Erin el Issa noted that automatic bill pay introduces the risk of account overdrafts or bounced payments, which will do much more harm than good in the end. Not only will you have to pay late fees, you may also be met with overdraft fees and other headaches.
Take out a small business loan
At some point, every business has needed – or will need – to tap into an immediate source of capital with the help of an alternative lender. Whether this need arises in response to difficult times, or as a way to manage future expenses in response to a growth opportunity, there are are plenty of lenders that can supply the quick injection of capital that your business needs.
Again, managing business expenses isn’t easy, but with a little bit of help from the right alternative lender, it can be easier for your small business to find a way forward.