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5 Must-Know Tips to Streamline Your Business Finances

Discover 5 practical tips to simplify your business finances, save time, and support growth with FNBT’s expert tools and solutions.

businessman looking at documents and tablet, doing finances

Business owners often spend excessive time managing finances, detracting from core business activities like sales, marketing, and customer service. Studies reveal daily losses of 1.5 hours to unproductive tasks, including inefficient financial processes, totaling over three weeks annually. Tax preparation alone can consume 40-80 hours each year, and monthly financial closes can take several days. This inefficient use of time reduces productivity and impedes business growth by limiting access to timely financial insights.

 

This post explores ways business owners can streamline their finances and reclaim valuable time to focus on strategic growth.

Separate Business and Personal Finances

Mixing personal and business finances is a common mistake, especially for new business owners. While it might seem convenient initially, it can quickly lead to a mess with consequences. Establishing and maintaining distinct financial boundaries is crucial for the health and longevity of your business.

Why It Matters

  • Difficulty tracking income and expenses hinders accurate financial assessment.
  • Increased risk of errors, missed deductions, and audits.
  • Personal assets can be at risk.
  • It is harder to secure loans and investments due to unclear financials.
  • Obscured profitability and inability to track key metrics.

Create Financial Boundaries

Through various business and personal banking solutions, FNBT helps business owners maintain the separation of their business and personal finances.

Dedicated Business Accounts

  • Business checking and savings accounts are designed for business use. These accounts have features tailored to businesses, such as higher transaction limits, the ability to accept various payment types, and online banking tools for managing business finances. In addition to standard features, FNBT offers BaZing Business Benefits, a program with savings and discounts to boost your bottom line.
  • For businesses that accept credit and debit card payments, FNBT offers merchant services that facilitate these transactions and deposit the funds directly into the business bank account. This keeps sales revenue from personal funds.

Business Credit Cards

  • Business credit cards have distinct credit lines from personal cards, allowing business owners to make purchases specifically for their business and build a separate business credit history.
  • FNBT, in partnership with Elan, offers free online expense reporting tools with its business credit cards, making it easier to track spending and prepare for taxes.

Dedicated Payroll Accounts

Dedicated payroll accounts such as a Zero Balance Account help businesses manage employee payments, tax withholdings, and direct deposits, ensuring employee compensation is handled separately from the owner's personal finances.

Online Banking and Financial Management Tools

  • Online banking platforms allow business owners to access their account information, track transactions, and manage their finances remotely. Often, these platforms offer features like account alerts and notifications that can help business owners monitor their cash flow and identify any unusual activity.
  • FNBT integrates with popular accounting software such as QuickBooks, making reconciling accounts and tracking financial data easier.

Business Loans and Lines of Credit

Maintaining separate loans and lines of credit helps to separate credit assessments. When applying for business loans or lines of credit, FNBT assesses the business's financial health separately from the owner's personal finances. This reinforces the distinction between the two.

Expert Advice

FNBT has a knowledgeable and dedicated business banking team that can advise and guide on managing business finances, including strategies for maintaining separation from personal funds.

Automate Key Financial Processes

In today's fast-paced business environment, efficiency is paramount. Manual financial processes, while seemingly simple, can be incredibly time-consuming, tedious, and prone to human error. Automating these tasks saves valuable time, enhances accuracy, and provides useful insights into your business's financial health.

Why It Matters

  • Manual tasks (invoicing, payments, payroll) consume significant time, diverting focus from strategic activities.
  • Repetitive manual tasks increase the risk of errors, leading to financial discrepancies and potential legal issues.
  • Manual processes lack real-time data, hindering financial tracking and informed decision-making.
  • Time spent on manual tasks could be used for more profitable business activities.

Implement Automation Strategies

1. Implement Accounting Software: Accounting software like QuickBooks provides a centralized platform for managing all aspects of your business finances. These programs automate tasks such as:

  • Invoicing
  • Recurring billing
  • Payment reminders
  • Expense tracking
  • Financial Reporting

2. Set Up Automatic Bill Payments: Use FNBT online banking and bill pay service to automate recurring bill payments. This ensures timely payments, avoids late fees, and simplifies bill management.

3. Use a Payroll Service: Payroll services like ADP automate payroll calculations, tax withholdings, direct deposits, and tax filings, avoiding late fees and ensuring timely payments.

4. Integrate Merchant Services: Integrate payment processing solutions into your website or invoicing system to automate payment processing and provide customers with convenient payment options.

Businesses can significantly improve efficiency, accuracy, and overall financial management by automating key financial processes.

Implement Consistent Expense Tracking

Effective expense tracking is the foundation of sound financial management for any business. It provides a clear picture of how your money is being spent, allowing you to identify areas for cost reduction, improve profitability, and make informed financial decisions. Without consistent and accurate tracking, you're essentially operating in the dark, making it difficult to control your finances and achieve your business goals.

Why It Matters

  • Tracking expenses reveals overspending and enables cost reduction.
  • Reducing expenses (identified through tracking) directly increases profitability.
  • Accurate expense data informs pricing, marketing, investment, and resource allocation decisions.
  • Detailed expense records ensure accurate deductions and avoid IRS issues.
  • Historical expense data enables accurate budgeting and financial planning.
  • Tracking expenses against benchmarks reveals areas for improvement.

Set Up an Effective Tracking System

  1. Choose a tracking method through accounting software or dedicated expense-tracking apps such as Expensify or ZoHo Expense. The programs feature receipt scanning and mileage tracking.
  2. Establish a clear system for categorizing expenses (e.g., rent, utilities, marketing, supplies) for better analysis and reporting.
  3. Record all expenses, no matter how small. Keep receipts and documentation for all transactions.
  4. Regularly review your expense data to identify trends, outliers, and areas for potential cost savings.
  5. Regularly reconcile bank and credit card statements with your expense records to ensure accuracy.

Consistent expense tracking will help you understand your business's financial health, enabling you to make informed decisions.

Create and Regularly Review a Budget

A budget serves as a financial roadmap for your business. It's a projection of your expected income and expenses over a specific period, providing a framework for managing your finances effectively. Creating a budget isn't a one-time task; regularly reviewing and adjusting it is essential to ensure it remains relevant and useful as your business evolves.

Why It Matters

  • A budget provides direction, outlining financial goals and the steps to achieve them.
  • Projecting income and expenses anticipates surpluses and shortfalls, enabling planning for investments or cash flow management.
  • A budget highlights potential cash flow problems, allowing for proactive solutions.
  • A budget guides informed decisions on investments, spending, and resource allocation.
  • Comparing actual results to the budget measures performance and identifies areas for improvement.
  • A budget demonstrates financial responsibility to lenders and investors.

Build and Maintain Your Budget

1. Choose a Budgeting Period

Decide on a suitable budgeting period, such as monthly, quarterly, or annually. Monthly budgets are common for smaller businesses, while larger businesses may use quarterly or annual budgets.

2. Project Your Income

Estimate your expected revenue based on historical data, market trends, and sales forecasts. Be realistic and consider potential fluctuations in sales.

3. Project Your Expenses

Estimate your expected expenses, including both fixed costs (e.g., rent, salaries) and variable costs (e.g., marketing, supplies). Use historical data and industry benchmarks to inform your projections.

4. Use Budgeting Tools or Templates

Utilize budgeting software, spreadsheets, or online templates to simplify budgeting. These tools can help you organize your data and generate reports.

5. Regularly Compare Actual Results to Budget: Regularly (e.g., monthly) compare your actual income and expenses to your budgeted figures. This will help you identify any variances and understand why they occurred.

6. Make Adjustments as Needed

Adjust your budget accordingly if you identify significant variances between your actual results and your budget. This will ensure that your budget remains a relevant and useful tool.

7. Involve Key Personnel

If you have employees responsible for specific areas of your business, involve them in the budgeting process. This will ensure that the budget reflects the realities of their departments.

Regularly Monitor Cash Flow

Cash flow is the movement of money into and out of your business. It's the center of any organization, regardless of size or profitability. Even highly profitable businesses can face serious financial difficulties if they don't manage their cash flow effectively. Consistent monitoring is crucial for anticipating potential shortages and taking timely corrective action.

Why It Matters

  • Cash flow covers daily expenses (payroll, rent, etc.); insufficient cash disrupts operations.
  • Profitability doesn't guarantee positive cash flow; poor collections or expense management can cause problems.
  • Monitoring cash flow anticipates shortages, allowing time for corrective action.
  • Accurate cash flow data is crucial for informed investment, expansion, and hiring decisions.
  • Consistent monitoring prevents crises and ensures meeting financial obligations.
  • Strong cash flow demonstrates financial health and attracts funding.

Implement Effective Cash Flow Management

  1. Project incoming/outgoing cash (weekly, monthly, quarterly), considering sales, payments, expenses, and loan repayments.
  2. Monitor customer payments and implement strategies to improve collections (timely invoices, discounts, follow-ups).
  3. Negotiate favorable payment terms with suppliers and ensure timely bill payments.
  4. Implement inventory management techniques (e.g., just-in-time, demand forecasting) to avoid excessive stock.
  5. Update the cash flow forecast to reflect changes in the business.
  6. Utilize cash flow management software or online tools for efficient tracking and management.

Streamline Your Business Finances with FNBT

Managing your business finances shouldn't feel overwhelming. FNBT is here to partner with you, offering tailored solutions to streamline your financial operations. Our dedicated business banking team will review your current setup and recommend strategies using FNBT's business solutions to help you grow and succeed. Contact us today or visit a branch in Southern