Small business money management tips and tools

Payment processing for small businesses

One of the best (and most important!) parts of running a business is getting paid. That’s why it’s crucial to understand payment processing for small businesses. Not only can a payment processor provide a convenient and streamlined experience for shoppers, but it can also help increase sales for your business.

Most notably, with a reliable and secure payment processing system, you’ll be equipped to accept payments from customers using their preferred methods, like credit and debit cards, online payments, and digital wallets.

Credit and debit card payments

Credit cards remain the most popular payment method in the U.S.1 They provide convenience and security for both shoppers and businesses, making it easy for customers to quickly complete large purchases without paying upfront or handling cash. Customers can also use credit and debit cards to access rewards programs and benefits when they spend.

Since shoppers still prefer credit and debit cards, offering these payment methods can help businesses increase sales.

Online payment gateways

E-commerce businesses can use online payment gateways to securely process customer transactions made with various payment methods. How does it work? The payment gateway sends the customer’s information from your e-commerce site to your payment network for fast and efficient processing. Payment gateways also take measures to authorize transactions and encrypt customer data, helping businesses minimize risk and prevent fraud.

Cash and check transactions

There are advantages and limitations to accepting traditional payment methods like cash and checks. When a customer pays in cash, for instance, the business instantly receives their payment and avoids any payment processing fees, which often come with other payment methods like credit cards. However, cash and checks come with some security and fraud risks. For example, they can be stolen, lost, counterfeited, or forged. In the case of theft or payment interference, it’s also more difficult to track and recover cash payments compared to credit card or digital wallet payments.

Contactless and digital wallet options

Contactless payments are becoming increasingly popular as customers seek more secure, accessible, and convenient ways to pay. Customers can use contactless cards, for example, to simply tap to pay at checkout. These cards use near-field communication (NFC) technology to safely transmit encrypted payment data between the customer’s device and the payment terminal. Shoppers can also use digital wallets like Apple Pay and Google Pay to make contactless payments and complete transactions right from their mobile device. With these frictionless options, shoppers don’t have to swipe or insert their card into a reader — or fumble with physical cash and checks — making payments faster and more secure.

Billing and invoicing for small businesses

Another essential step to getting paid? Understanding invoicing for small businesses. By sending out invoices promptly and keeping track of payments, you can streamline your financial processes, minimize errors, and ensure timely payments. You may also be able to avoid cash flow problems and ensure you have enough funds to cover expenses and invest in growth.

That’s why it’s important to develop an efficient invoicing and billing system with features like:

• Professionally designed invoice templates that are easy to read and customizable
• Clear itemization of the products or services provided and the associated costs
• Transparent invoicing terms that outline late payment fees and penalties
• Payment due date tracking, such as through a small business money management app
• Automatic unpaid invoice reminders
• Real-time cash flow management

If you’re overwhelmed by the thought of manually tracking your invoices, consider business money management software or helpful invoicing solutions to automate and simplify your invoicing system.

Expenses tracking for small business

Having the tools to manage expense tracking for small businesses is crucial, too. By categorizing expenses and recording receipts, you can gain a clear understanding of your operation’s financial health and find relevant deductions it’s time to file your taxes. Expense tracking can also help you make informed decisions about budgeting and growth planning.

For example, businesses commonly group their expenses into three categories:

• Production expenses — The costs of acquiring raw materials, manufacturing products, and delivering goods to customers.
• Operating expenses — The administrative costs of keeping your business running, including equipment purchases, vehicle payments, software subscriptions, and business license fees.
• Selling expenses — The costs of advertising and selling goods and services to customers, including marketing expenses and freight shipping fees.

Investing in business expense tracking software can help automate manual tasks such as categorizing expenses, tracking receipts, and generating expense reports with just a few clicks. The right expense tracking tool can also help cover accounting basics like generating financial reports and keeping your tax information up to date in case your business is ever audited. Get more tips on how to track business expenses.

Small business financial planning and budgeting

Entrepreneurs can benefit from creating and managing a budget, no matter what kind of business they run.

One of the best parts of budgeting is that it can help small businesses anticipate and plan — for both the good and the bad. For instance, you can use your budget to help pinpoint potential cash flow crunches, giving you time to act before it’s too late.

Budgeting for small businesses can also provide a framework for monitoring performance over time, identifying areas for improvement and growth, and future-proofing your business against changes in your industry.

To accurately build your budget, you’ll want to outline factors like:

• Projected revenue and expenses
• Financial goals
• Performance tracking against your projections

Projected revenue and expenses

Project your revenue and expenses to better understand what your budget will need to cover. That’s where cash flow statements can help. Cash flow statements are used to track how money moves in and out of a business during a given period. That is, they can provide a clear view of which business activities generate revenue and which contribute to increased spending.

With this information, business owners can make decisions about where to cut costs or increase investments to improve cash flow and meet their revenue goals.

Financial goals

Businesses should set realistic financial goals based on their projected revenue and expenses, and the actual bandwidth of their employees. These goals should always be backed up by real numbers from financial reports, not merely aspirations.

For example, a small e-commerce business might set a goal to reduce overhead costs by 10% in the next quarter. According to their cash flow statement, inventory storage remain a major expense. So, the business might pivot to dropshipping — the process of delivering products directly from the manufacturer to customers — to remove those extra storage and shipping costs and increase revenue.

Performance tracking

One of the best ways to improve money management for small businesses is to consistently track financial performance against your goals with key reports such as:

• Balance sheets. Balance sheets document a business’s total assets, liabilities, and equity. Assets might include cash, inventory, and accounts receivable. Liabilities might include debts from loans and tax experiences. By subtracting liabilities from assets, you get equity, which represents the current value of a company to shareholders.
• Profit and loss statements. Also known as income statements, profit and loss statements document a business’s revenue and expenses over a certain period of time, such as a quarter or year. By tracking these profits and losses, businesses can better understand how they manage costs and earn money to keep their operations running.

Businesses can use bookkeeping software and small business money management apps to help automatically generate these reports and track financial performance over time.

Cash flow management for small business

In basic terms, cash flow management for small businesses involves keeping an eye on both the money coming in and going out, so you can ensure you have enough funds to cover your day-to-day operations and grow your business.

With cash flow management, you'll also be able to spot any potential cash flow issues early on and take the right steps to address them. That could mean finding ways to reduce expenses, getting better payment terms from suppliers, or boosting your sales efforts.

Another key to addressing a cash flow crunch? Planning ahead. Try to forecast your upcoming expenses like taxes, rent, and equipment purchases to avoid any unexpected financial surprises.

Financial reporting for small business

There are many benefits to accurate financial reporting for small businesses — from gaining a better understanding of the current state of your operation to attracting investors and securing funding for growth.

To help improve your money management in business, you might create common types of financial reports described above, such as:

• Balance sheets
• Profit and loss statements
• Cash flow statements

Together, these three reports paint a detailed picture of your company’s financial performance and can help track progress toward goals. Regularly creating and reviewing these reports, such as each month or quarter, can help you make informed decisions about where to invest and where to cut back as you grow your business.

If you feel inundated with data and transaction information, remember that you can use business money management apps to help automatically generate financial reports. You can also leverage reporting tools to access the analytics and insights you need to run and better understand your business.

Payroll management for small business

If your small business has employees, managing payroll can become a real headache. The good news is some tools can make the process as quick and painless as possible.

For instance, there are systems that can automate and streamline payroll management for small businesses. While you focus on growing your company, they can help handle all the nitty-gritty details, like calculating wages, deducting taxes and benefits, and generating pay stubs. With the payroll management right system in place, you can save time and reduce the risk of errors, so you can focus on growing your business.

Plus, having an accurate payroll system helps you stay compliant with employment regulations and build trust with your employees, so they know they're being paid correctly and fairly.

Check out more employee management tips.

Financial security and fraud prevention for small business

As the risks for fraud continue to rise, take proactive steps to keep your business safe from cyber threats and data breaches. Fraud not only impacts businesses financially, but it can also damage their reputation, erode consumer trust, and come with legal consequences. For example, many businesses today are susceptible to different types of fraud, including:

• Chargeback fraud. Customers request a refund or chargeback after they’ve successfully received their product.
• Credit card fraud. Shoppers use stolen or unauthorized credit card information to complete a purchase.
• Phishing scams. Fraudsters send fake emails or text messages to trick people into sharing their personal information or payment details.

Not sure how to get started with financial security and fraud prevention for small businesses? Here are some helpful tips:

• Use secure payment systems that implement encryptions, tokenization, and other security measures to protect sensitive data.
• Regularly monitor your accounts for any suspicious activity and use automated risk management solutions to flag potential security threats. Catching problems early can help minimize the damage.
• Educate your team about cybersecurity best practices, such as how to create strong passwords, spot phishing emails, and manage chargeback disputes.

Learn more about ecommerce scams to avoid and how to prevent them from impacting your business.

Access to small business funding

Now that you’re running your business like a well-oiled machine, it’s time to think about the future. Whether you're looking to expand your business, manage your inventory, buy new equipment, or plan for emergency situations, gaining access to small business funding can be a game-changer.

For example, depending on your short- and long-term business goals, you might consider different funding options, such as:

• Small business loans. Use business loans to receive a lump sum of money up front and pay it back in installments (plus interest) over time, such as on a monthly basis. Small business loans can be helpful for meeting long-term financing needs, such as buying an expensive new piece of equipment or hiring additional employees. Learn how to apply for a business loan and explore business loans for women.
• Lines of credit. Similar to a credit card, you can use a line of credit to access money as needed up to a certain credit limit and pay it back each month. Even if you have a high credit limit, you only pay interest on what you borrow. That’s why lines of credit are helpful for meeting short-term needs or unexpected expenses.

Remember to research credible lenders and different financing options to find the ones that make most sense for your business goals.