How you manage your finances, as well as how you plan for future growth, are the cornerstones of a successful business.

But if you’re like a lot of entrepreneurs, you haven’t put much thought into a financial strategy. You may be so mired in the daily tasks of running your business that you haven’t considered what you need to do for future success.

That’s where having a financial plan comes in handy. It can help you make the most of the working capital you have and find financing when you need more to grow.

Why a Financial Strategy is Crucial to the Success of Your Small Business

What you do in your business will impact it in a year, in five, even in 10. That’s why having a successful business and financial strategic plan is so important. Without one, you may spend your time putting out fires and managing day-to-day operations without really seeing the bigger picture, and your business may stagnate rather than grow.

Let’s say you want to increase revenues by 30% in the next two years. How will you do that? You may need to hire additional salespeople or increase pricing. These all fall under your financial strategy.

And if growth is your objective, you may need to plan to purchase commercial real estate. Though you may not be able to afford to spend $1 million on an office building today, with the right cash flow management and credit-building strategies, you can set your company up to be in a position to take out financing at a low rate in a few years.

Bottom line: having a financial strategy helps you carve your path to success.

Small Business Financial Strategies To Strengthen Your Business

Now let’s dive into some of the strategies that small business owners can use to grow their companies.

Establish Good Financial Habits from the Start

If you just launched a new business, it’s important to set your business up for financial success from the start. Invest in accounting software and open a business account so you separate personal and business finances.

Being a new business, you may not qualify for some types of financing from banks and SBA lenders, so work on building your credit by opening and using business credit cards responsibly.

Get a Payment Policy in Place

Late-paying clients can really jeopardize your business cash flow. That’s why it’s important to establish a policy outlining when invoices are due. Consider charging a late fee to encourage clients to pay on time, or offering a discount if they pay early so you keep your liquidity flowing.

Make it easy for clients to pay by automating as much as possible with your accounts receivable processes. Accepting debit and credit cards, as well as bank transfers, lets you get paid digitally so you don’t have to wait for a check to arrive in the mail.

Hire Help

Even a small business can benefit from bookkeeping help, especially if you don’t have the time to update your accounts regularly.

You can hire a part-time accountant, CPA, or bookkeeper to make sure your business expenses are appropriately categorized, send invoices, check on late payments, and even file your taxes.

The time you save not having to manage your company’s finances is time you can reinvest in running your business.

You might also consider hiring a financial advisor who can help you establish your business’ financial goals and determine how to best reach them.

Understand Your Financial Statements

Things like cash flow statements, balance sheets, and profit and loss statements might sound complicated and like something your accountant should deal with, but it’s important that you as the business owner understand your own financial statements.

These statements tell the story of your business’s financial wellbeing. Looking at assets and liabilities, cash flow, or projected sales paints a picture of where your business is, and where it’s headed so that you can make decisions to course-correct when needed.

Constantly Monitor Your Credit

Even if your business isn’t a new one, it’s important to keep an eye on both your personal and business credit. If you haven’t yet established credit for your business, spend time learning how to establish business credit, since some lenders look at your scores when determining whether to give you financing or not.

Make sure there are no discrepancies in your credit reports. If they are, report them immediately, since they can negatively affect your credit. Work to raise your credit scores by paying down debt and making on-time payments each month.

The higher your credit scores, the lower the interest rate you will qualify for, should you decide to take out a loan one day.

Consider Your Financing Options

Whether you need an injection of cash right now or not, there may come a day when you do. Maybe you will want to purchase another business in a few years, hire more help, or amp up your marketing spend. Don’t wait until then to research your options and find the type of small business loans or lines of credit that are the best fit.

If you run a startup, also look into venture capital, though know that any investor will have a piece of your company’s equity and may want a hand in the decision-making process.

How to Create a Financial Strategy for Your Small Business

We’ve covered some tactics you can use to take your business to success. Now let’s build that into a financial strategy.

If you haven’t yet created a business plan, now is the time to do so. There are many free templates available online, so use one of them as a starting point. In your small business plan, outline your business goals and how you will achieve them. Leverage those financial statements that you’re now an expert at deciphering.

Once you finalize your business plan, don’t stick it in a drawer and forget about it. It needs to be a living, breathing document, and one that you update as your business pivots.

Successful entrepreneurs know they must see beyond the short-term to develop a business strategy that plans for the long-term financial health of their companies.