Managing Financial Anxiety Within a Small Business
You’ve started running your own business. It started out as an exciting journey filled with growth, challenges and thriving opportunities. However, as a business owner, when you begin to grow; striving to expand your team, clientele, and market presence – financial control can start to slip out of your hands and financial anxiety can seep in. Feeling insecure with your money and business finances, you may stumble across one of the most common concerns: financial anxiety and other financial related stress too.
In this article, we’ll explore practical strategies to your mental health, reduce financial anxiety and gain confidence in your mental health and small business’s current financial well being.
Financial anxiety can affect us small business owners in different ways, from having sleepless nights and difficulty concentrating to cutting back on our social life to save money. It could also mean you avoid checking your bank balance, leave bills unopened, or save obsessively ‒ or, at the other end of the scale, overspend and make arguments at home. Missing out on social events, binging on junk food, and neglecting exercise are other effects of stress.
Surely, being stressed as a business owner reduces can largely a negative impact on the success of your business. Here are the top solutions to help you cope with financial anxiety, based on the common financial stress factors outlined in the survey. Hire the right people. The fact that you’re a business owner doesn’t mean that you have to be running a one-man show. In fact, most successful entrepreneurs have an army of highly qualified and dedicated people behind them, who are helping them.
A competent accountant or financial advisor can provide you, a business owner, with first-hand knowledge, and increase your financial literacy in turn. An audit process was carried out in the Xero survey, 35% of survey’ respondents reported feeling anxious, also reported feeling anxious about admin duties and 26% admitted feeling stressed by compliance. Financial anxiety, while running a business, can be felt most strongly when overlooking issues or underperforming areas, which is where a small business audit can help. Audits are compulsory for businesses that turnover more than £10m, but they can be of use to businesses of all sizes.
Embrace the Art of Cash-Flow Planning
At the heart of good financial management lies a great understanding of your business’s cash flow.
Cash flow analysis involves closely tracking the inflow and outflow of funds within your company. This will shows you the ebbs and flows of your financial operations, revealing the times of profit and potential loss. By dissecting these numbers, small business owners, can pinpoint patterns, identify seasonal trends, look at trends, and gauge cash flow challenges that your business may have in the future.
To begin looking at how money moves in and out of your business, first, sort your incoming money like sales income, money you borrow, and investments you make. At the same time, organise your outgoing money, which includes things like paying employees, filing taxes, covering bills like electricity and rent, and other costs of running your business. This grouping will help you as a small business owners see a clear picture of all the business finances happening in your company.
Understand the Power of Cash Flow Planning
Cash flow planning goes beyond just looking—it empowers and helps business owners shape their financial destiny.
As a small business owner, estimating the money coming into and going out of your business in the future, you can plan better and use your resources smarter to drive business forward. You’ll be able to start predicting what will happen in the near future to deal with urgent situations. Then, over time, expand your predictions to include the middle and far-off future.
This will help you decide wisely on things like growing your business, investing, and where to put your resources. This will also allow you to break your expenses down into bitesize pieces so that you won’t feel as overwhelmed and instead will allow you to gain more financial confidence as a business owner.
In today’s digital landscape, advanced tools and software simplify the cash flow planning process.
One tool that’s really helpful is called Float, and it works smoothly with accounting platforms like Xero. Float lets you create a detailed plan for how money will move in and out of your business over the next 36 months. This gives you really valuable insights into where your finances are headed, which is crucial for both managing financial stress and promoting financial growth.
With Float’s easy-to-use interface, you can play around with different factors, simulate what might happen in different situations, and see how your choices affect your business loan cash flow.
By using technology-driven solutions like this, you can turn the sometimes overwhelming task of planning your cash flow into a powerful strategy. These tools give you updates in real-time, help you work together with others, and let you make quick decisions when things change in the market.
Making cash flow analysis and planning a regular part of how you manage finances responsibly is a big step toward reducing financial stress. As you get comfortable with understanding the numbers and see the potential of cash flow planning, and as you use these advanced tools, you’ll be more prepared to handle any challenges that come up.
As you keep building your business, having a strong grasp of cash flow will become one of the key foundations of your financial strength and success.
Mastering Cost Control
When you’re running a small business, how you spend your money really matters.
It can decide if your business thrives or struggles. Let’s talk about how to be smart with your spending and make sure your business is financially strong. Every time you use your money, it’s like a choice you’re making. Some choices are better for your business than others. Here’s how to decide:
- Needs vs. Wants:Figure out what your business really needs to work well. Spend money on things that help your business grow and do its job.
- Getting More Back:When you choose to spend money, think about your return on investment. Aim for things that bring back more money than you spent.
- Stay on Budget:Make a plan for how much money you can use to manage your finances responsibly. Stick to that plan so you don’t spend too much and run into future problems with your business.
2. Keeping Things Simple: Using Your Money Wisely
Using money wisely means not wasting it and using it in ways that make sense. Here’s why it’s good to keep things simple:
- Less Waste: By not spending money on things you don’t really need, you save your money for important stuff.
- Getting More Done: When you do things in a simple and organized way, you can get more work done without using up too much money.
- Being Ready for Changes: When you’re careful with your money, you’re better prepared if something unexpected happens. It’s like having a backup plan.
3. Checking if it’s Worth It
Not every expense is the same. Some things you spend money on are better than others. Here’s how to figure it out:
- Think Long-Term: Ask yourself if spending money on something will help your business for a long time, not just for a little while.
- Can It Grow with You: Consider if the thing you’re spending money on will keep helping your business if it expands
- Look at the Risks: See if there’s anything that could go wrong with what you’re spending money on. Try to balance the chances of something bad happening with the good things you expect.
By making good choices about where your money goes, keeping things simple, and thinking carefully about your spending, you’ll not only feel less stressed about money, but you’ll also make your business stronger. Remember, it’s important to keep learning and adjusting your spending as your business grows.
Change How You Think
When it comes to easing financial stress or business related stress in your small business, a smart move is to use practical scenario planning. This means shifting from just worrying about the worst to actually planning for different outcomes.
Being practical doesn’t mean ignoring problems or being overly hopeful. It’s about being prepared for both positive and negative outcomes. Start by thinking about different things that might happen to your business, like how the market might change, if people will keep buying, or if unexpected expenses arise.
For example, picture things like slow growth, steady sales, or even short dips in business. When you think about the variety of different possibilities, you end up with clear and calm mind with a good plan for making choices – equipping yourself with a more composed mindset and a strong plan for making decisions.
By embracing this practical approach, you’re creating a thoughtful roadmap that guides your decisions and alleviating the financial anxiety you may feel from a lack of control in the future of your business. This roadmap keeps you focused and adaptable, giving you a clear path forward regardless of the challenges or opportunities that arise.
In essence, it’s like having a dependable GPS for your business, ensuring you stay on course and make informed choices with confidence.
Beat the Worst Case Scenario
Thinking about the worst things that could happen can stop you from making choices and make your financial anxiety worse. Instead, try these things:
For each scenario, devise contingency plans that outline steps to take if a particular situation unfolds. This proactive approach empowers you to respond swiftly and strategically, minimizing the impact of unexpected events.
Stress test your business model by evaluating how it would fare under various adverse conditions. This exercise helps you identify vulnerabilities and implement pre-emptive measures to enhance business development and resilience.
Continuously review and update your scenario plans. As your business evolves, your assumptions and predictions may change. Regularly revisiting and adjusting your plans ensures they remain relevant and effective.
Embracing realistic scenario planning allows you to cultivate a sense of preparedness and control. Your decision-making becomes more informed and calculated, and you’re better positioned to navigate financial challenges with confidence.
Remember, the goal is not to eliminate economic uncertainty entirely, but to equip yourself with the tools and strategies to manage it effectively. Through this shift in perspective, you’ll gain a clearer understanding of your business’s financial landscape and be better equipped to steer it towards success.
While it’s crucial to acknowledge various scenarios, it’s equally important to focus your efforts on the most likely outcomes, as this can greatly impact your financial confidence and contribute to your company’s success. These are scenarios that, based on your industry knowledge, market trends, and historical data, have a higher probability of occurring. By making the most likely scenario your goal, you set a practical target that aligns with your business’s actual trajectory.
With a clear understanding of where your efforts are directed, you can discern the truly important tasks from the less impactful ones. By prioritising tasks that align with your most likely scenario, you ensure that your time, energy, and resources are invested where they can generate the greatest results. This streamlined approach aids in maximizing your efficiency and efficacy as a business owner, allowing you to optimise more financial confidence and propel your companies’ success forward.
This approach helps you allocate resources, set milestones, and create actionable plans that are attuned to reality. As you work towards achieving this target, you’re better equipped to manage potential challenges and seize opportunities that arise.
Financial decisions should never be isolated from your business strategy. In fact, they should be intrinsically linked. An empowered decision-making process involves aligning financial choices with your broader future business growth strategy and objectives. This could involve evaluating potential investments, considering how they fit into your future business growth strategy’s trajectory, and estimating their impact on your financial stability. By intertwining strategy and finance, you ensure that each financial move contributes to the larger puzzle of your future business growth strategy’s success.
Building a foundation of financial confidence isn’t a one-time endeavour; it’s a continuous journey. As your business evolves, so will your financial challenges and opportunities. To sustain your company’s success now, consistently revisit your financial strategies and reassess your plans.
Keep your finger on the pulse of your cash flow, regularly update your scenario planning, and fine-tune your cost control measures. By embracing this approach, you’ll generate a resilient financial structure that adapts and thrives in ever-changing business landscapes and you financial anxiety won’t become you.