By Owning a small business is no easy feat. The countless challenges and responsibilities can often be overwhelming, leaving small-business owners with the daunting task of making crucial financial decisions. However, according to our latest American Express Small Business Financial Confidence Report, only 54% of small-business owners feel confident in their ability to make these decisions. For businesses with fewer than 10 employees, this number drops even further to a mere 29%.
These numbers tell two distinct stories. On one hand, almost half of small-business owners exude confidence when faced with significant decisions. On the other hand, there is an evident need for greater support for the other half, especially for the smallest of small businesses.
What makes small businesses so vital to the U.S. economy is their agility and speed, which contribute significantly to economic growth. However, when these entrepreneurial energies are hindered by indecisiveness, we all suffer the consequences.
While I may not be a small business owner myself, I have had the privilege of working for a financial institution that caters to the financial needs of millions of small businesses. Based on my experience, I recommend three effective ways in which these businesses can cultivate confidence when it comes to financial decision-making:
1. Leverage Data
Your business is more than just numbers on a spreadsheet, but analyzing the relevant variables can provide valuable insights. Maintaining accurate financial records and tracking performance metrics allows you to identify any changes or patterns. Take a close look at customer behavior, cash flow patterns, vendor relationships, and expenses.
It’s possible that you may discover areas where you’re overpaying for services or underutilizing certain tools. Additionally, analyzing customer behavior enables you to address any emerging trends. Utilizing digital cash-flow management tools can also simplify the process of summarizing and forecasting your company’s financials. By aligning these trends, you’ll gain a clearer understanding of your company’s future trajectory.
2. Establish a Cash Reserve or Access to Credit
This may seem obvious, but it’s crucial to set aside funds to cover any revenue shortfalls or unexpected expenses. In the event that you need to dip into these reserves, make replenishment a priority. Knowing that you have the capability to withstand the unexpected will elevate your decision-making abilities. Instead of opting for cautious or effortless choices, you can focus on making decisions that are best for your business.
Although these measures are not exhaustive, they offer a solid foundation for building financial confidence as a small-business owner. By leveraging data and maintaining financial resilience, you can navigate the complex landscape of decision-making with increased certainty. Remember, owning a small business is challenging, but with the right strategies in place, you can thrive and contribute to the growth of the economy.
Access to Cash: A Solid Strategy for Business Success
In challenging times, having access to cash is crucial for businesses. It provides flexibility, stability, and peace of mind when tough decisions need to be made. Whether your business is thriving or facing obstacles, having a reliable short-term funding option allows you to make important moves such as hiring staff, increasing inventory, and seizing significant opportunities.
1. Delegate Financial Responsibilities
It’s common for small business owners to handle bookkeeping themselves, especially during the startup stages. However, as the business grows, managing finances becomes more time-consuming. Mistakes in accounting or tax planning can lead to costly consequences that you can’t afford.
To ensure financial accuracy and avoid unnecessary stress, consider delegating transactions, payroll, and tax planning to an accounting professional. Hiring a full-time accountant may not be necessary; you may only need someone for a few hours a month. Find an accounting professional who stays updated on the latest laws and tax breaks. Discuss your cash flow, goals, and key business metrics with them.
A skilled accountant will not only report on your current financial situation but also organize your financial data to empower your decision-making. They will identify areas for improvement, efficiencies, and potential cost savings. Having someone trustworthy to keep your financial house in order will give you peace of mind and allow you to focus on the future of your business.
2. Boost Confidence through Financial Decision-Making
Improving your financial decision-making is crucial for the growth of your business. It enhances your confidence and enables you to make strong choices that lead to success. This process involves careful analysis, humility, and flexibility.
By implementing these best practices and trusting yourself, you create a self-reinforcing loop that allows your business to thrive even in challenging times. Empower yourself to navigate tough choices confidently so that your business can continue to succeed and prosper.
Note: Anna Marrs is the Group President of Global Commercial Services and Credit & Fraud Risk at American Express.
More: With wages soaring for younger workers, teens are reaping ‘amazing’ opportunities this summer
Also read: Suze Orman tells us why you need not one, but two, of these accounts: ‘There’s a vital difference that people have to get in their head.’
Comments