Understand where the money is going
The first step to feeling financially secure is knowing your incomings and outgoings. “A lot of customers feel like they’re doing well but every time they make money, they buy materials to put back into their business—they buy more opportunities to grow,” says CommBank business banking specialist Mathew Buckland. “They’re feeling growing pains as cash flow is strained.”
Cash flow can also be impacted by things like unexpected bills, tax debt or seasonal revenue. This is where forecasting helps. “If you’ve done your planning, you’ll know what the business will look like in six months or if there's going to be any seasonality,” says Buckland. “That will help you start preparing and putting money away for slow times.”
Learn how to manage your cash
You probably got into business as you love what you do, not because you want to manage money. That’s okay—there are people and products to help. “There’s a good cash-flow tool on the CommBank app and you can also get support from an accountant to draw up a cash-flow forecast,” says Buckland.
CommBank’s cash-flow management course, which was developed with the Australian Graduate School of Management at the UNSW Business School, is complimentary for all small businesses, regardless of whether you bank with CommBank or not. The course includes guidance, strategies and tools for managing your finances.
Pay yourself first (yes, really)
Up to 27 per cent of small business owners have dipped into their personal savings or didn’t pay themselves when money got tight over the past 12 months but that’s not a long-term strategy1. “You have to keep food on the table,” says Buckland, who suggests speaking to an accountant about how much you should pay yourself. “There’s a lot of different strategies people can put in place.”
How can you improve cash flow and take a salary? According to research, 85 per cent of SMBs have one or more strategies, such as reviewing expenses, keeping an emergency cash revenue and finding extra revenue streams1. Another option is a business overdraft, which can help with unexpected expenses. “It gives you a facility to keep growing and not at the expense of paying yourself,” says Buckland. “It helps the business carry itself.”
Try setting up a regular “payday” just like any other employee, even if it’s a modest amount to start with. That small habit can go a long way in helping you feel more secure and less like you’re running on empty.
A word on self-care
“Small business owners may feel a sense of purpose and identity associated with their business but it’s important not to tie your self-worth into how the business is doing,” says Quinn.
Rather than letting your mood rise and fall with the bottom line, try to focus on why your business matters to you. Then channel your energy into tasks that reflect those values and are within your control. And don’t hesitate to seek professional help if you need it. “Psychologists can provide support and guidance to manage stress levels, cope with anxiety and depression, build self-worth and develop healthy coping mechanisms,” adds Quinn.
