As a small business owner, you’re essentially writing your own paycheck. But that doesn’t mean you have an endless supply of funds anytime you need them. Instead, your earnings are dependent on a variety of factors, some of which are outside your direct control. So what can you do if you run into difficult financial circumstances? Here are a few ways to jump money-related hurdles.
Low Profits
Making enough money to get the business by is one thing, but is your business actually profitable? If you’re making sales and have a healthy pipeline, yet there’s little to no profit realized, you’re facing a profitability issue.
This issue could be a simple matter of low profit margins, or it could be the result of inefficient purchasing practices. If your business relies on raw materials and other items purchased from vendors, an audit is worthwhile to determine if you could be sourcing the same materials at a much lower cost without sacrificing quality.
Figure out which clients or customers are most profitable, and find ways to increase the amount of business they do with you. If you can identify a target customer type that tends to be more profitable, identify ways to seek out more of your ideal clients to boost revenue and profits.
Skyrocketing Overhead Costs
It’s also worth evaluating your overhead expenditures, such as the amounts you’re paying for office space, phone services, and any other recurring costs. If you have hourly or salaried employees, your payroll is an overhead cost as well, and that’s where employee productivity comes into play. It doesn’t make sense to pay a full-time office manager who does far more Facebook scrolling than she does managing the office.
An analysis of your overhead expenses may result in the need to make some hard decisions, such as letting go of some staff, but if you keep the health of your business in mind and take the emotion out of decision-making, these choices will be easier to make.
No Plans for Unforeseen Circumstances
In business, planning is everything. While it seems more pertinent to focus on the cash flow issues you’re experiencing right now, you should also be thinking about the future. What happens if a catastrophe hits when you’re least expecting it? For instance, does your business rely on you, personally, for the majority of operations?
Find ways to turn everything into a systematic process so that with or without you, your business continues to function like a well-oiled machine. Get a plan in place for emergency cash resources, such as a small business line of credit, to cover unexpected costs. Make sure that you have adequate insurance coverage to protect you against unexpected accidents, such as employee or customer injuries.
Taxes, Taxes, and More Taxes
As a small business owner, you’re most likely paying more in taxes than the average employee. That’s because small business owners must pay both the employer and employee share of Social Security and Medicare taxes.
When you add in other costs such as the business privilege tax levied by some municipalities (a tax fee paid for the privilege of doing business in the town, city, or municipality where the business is located), the need to file quarterly estimated taxes, and file taxes both personally and for your business entity, it’s not hard to see how taxes can quickly become the bane of your existence.
Always keep strict documentation of all business expenses and income, and find a good accountant who can guide you in taking the right deductions. Stay on top of all filing requirements to help you navigate through W-2 software and/or 1099 software. Filing and paying on time will help you avoid late fees and interest charges, and maximizing your deductions is the best way to lower your tax burden across the board.
Small business owners face a variety of financial challenges. Most are solvable, even if you have to practice creative problem-solving in order to overcome some financial hurdles. Planning for the future and being prepared for the unexpected is the best course of action, while working towards greater profitability and cash flow today.
Image via Pixabay by stevepb
Guest post by Julie Morris – Juliemorris.org