Overcoming Financial Challenges With Basic Financial Management for Small Business

Business Strategies
8 min
Nov 14, 2022

Running a small business is no small task. 

From payroll to data management to accounts receivable, it’s enough stress to frazzle even the most dedicated entrepreneur.

So what’s a small business owner to do?

We’re glad you asked. 

Here, we give you the top tips for ensuring the financial health of your business through financial management for small businesses, and show you how automating your systems can be the answer to overcoming the biggest business challenges of today. 

What Does Small Business Financial Management Involve? 

Small business financial management is an umbrella term that encompasses multiple areas, including: 

  • Bookkeeping
  • Budgeting
  • Creating financial statements
  • Making accurate projections; and
  • Accessing business financing

When these components are managed efficiently, business owners can wisely make the decisions they need to make to run their companies at full capacity.

What Are the Biggest Financial Challenges Faced by Small Businesses Today?

There are several big financial challenges that are seen consistently across multiple small business organizations.

The first is poorly designed processes. Let's face it. Process updates are costly, and while it takes time to design just the right processes, they make all the difference in the long run.

In-house finance is also a unique challenge for small business owners. Of course, this varies from business to business, but if you're a multi-state operator, your biggest challenge is likely managing huge volumes of data. Trying to get multiple sites to accurately and consistently report to a centralized accounting team can be a nightmare.

What Are the Financial Management Practices of a Small Business?

The financial management practices of small businesses include the processes of: 

  • Accounts payable
  • Payroll
  • Accounts receivable
  • Financial reporting; and 
  • Data storage

The key is knowing how to troubleshoot to ensure these components all come together to mesh with the small businesses operations. 

Accounts Payable

Accounts payable (AP) is the money your small business owes its suppliers — and it can often feel like you're on a see-saw trying to maintain the balance of a healthy cash flow coupled with optimal vendor relationships. 

Often, accounts payable issues within small businesses stem from outdated practices, like: 

  • Writing checks
  • Paper-based invoice processing; and 
  • Manual record keeping or one-off spreadsheets

And these old-fashioned methods can make it nearly impossible for a small business to:

  • Control company costs
  • Analyze spending
  • Process payments in a timely manner
  • Preserve supplier relationships
  • Match errors
  • Accurately invoice
  • Monitor company purchases
  • And more

How To Overcome Accounts Payable Challenges

Conquering challenges in your accounts payable department can be tricky if your company is still relying on the old ways of doing business — like manual record-keeping and snail-mailing checks. 

Add to that making loan payments and managing travel expenses and your AP team is probably beyond busy. 

The best way to overcome accounts payable challenges is through automation. 

Ditch the paper and streamline your AP into one convenient location that automates routine procedures like:

  • Invoicing
  • Coding
  • Routing for approval
  • Payment; and 
  • Reconciliation

This type of system removes the need for small businesses like yours to manually input your data and makes signing off on payments as simple as a single click of your mouse.

Automated accounts payable software may also provide analytical tools and dashboards that allow your finance teams to manage the accounts payable process and easily recognize and diagnose problems, such as: 

  • Exceptions 
  • Double payments
  • Fraud; and
  • Unauthorized purchases

Accounts Receivable

Accounts receivable (AR) refers to the money your small business is owed by customers who have purchased goods & services on credit. Generally, the credit period ranges from a few days to months to up to a year.

And while you probably have a policy in place for collecting those debts, you may not have a rock-solid plan in place to properly execute that policy — which can mean a deficit in valuable income. 

When it comes to accounts receivable in small business financial management, challenges may look like: 

  • Bottlenecks in cash flow
  • Insufficient capital for investing in growth opportunities, like hiring staff and updating equipment
  • Having to write off outstanding receivables
  • Errors on invoices and bills
  • Incorrect payment allocations; and
  • Missed follow-ups on overdue invoices

How To Overcome Accounts Receivable Challenges

As with accounts payable, the best strategy for overcoming your small business’s challenges in the accounts receivable department is to automate your process

A quality accounts receivable automatization tool puts everything at your fingertips and makes it easy for you to:

  • Schedule recurring invoices 
  • Avoid human error
  • Reduce the costs of payment processing
  • Get paid faster; and
  • Provide top-notch customer service

Add to that the time you save that’s usually spent tracking down overdue payments, and automation of accounts receivable is a win all the way around. 

Financial Reporting

The goal of financial reporting is to track, evaluate, and report business income. 

Financial reports examine resource usage and cash flow to assess the financial health of your business and cover a variety of reports including:

  • Income/profit and loss 
  • Net profit margin 
  • Balance sheets
  • Cash flow statements
  • Budget vs. actual
  • 13-week cash forecast 
  • Weekly sales; and
  • Accounts payable aging 

If these figures are off, it could be impossible to receive funding — and you may run into problems with the IRS.

When done correctly, financial reporting allows business owners and investors to make data-informed decisions about how to manage the business.

How To Overcome Financial Reporting Challenges

The best way to bring small business financial reporting challenges under control is through the centralization of data. 

Often information must be compiled from a variety of Human Capital Management (HCM) and payroll systems — which means the incoming data may be inaccurate, incomplete, or out-of-date.

Centralizing financial data through the use of an automated system gives small business owners the ability to view real-time data reports based on live data dashboards. 

By being able to monitor their data in real time, businesses can strategize their decision-making at the highest level. 

Data Management

Data management has traditionally been a challenging aspect of financial management for small businesses and includes things such as:

  • Data storage
  • Document control; and
  • Digital filing systems

Set your systems up correctly and train your people to utilize them properly. That way, information can be shared quickly and easily between all functions.

Poor data management may result in issues such as: 

  • Compromised customer data
  • Inadvertent violations of laws and regulations
  • Customer dissatisfaction
  • Reduced operational productivity and efficiency 
  • Missed income opportunities; and
  • Lost revenue

How To Overcome Data Management Challenges

The first step in overcoming data management challenges is the centralization and standardization of your company's data. 

This allows you to pull data reports together from a single source, rather than attempting to gather them from multiple systems across operations. It also provides you with the benefits of:

  • Secure data
  • Easier compliance
  • Less time spent on organizing data; and
  • Happier customers


Whether you have one employee or 1,000, payroll is a critical part of small business financial management.

And no matter how much you try to stay on top of it, managing payroll can pose a multitude of issues, including:

  • Record keeping
  • Trying to stay in the loop of unemployment law and regulatory changes
  • Ensuring time-efficient and accurate payroll processing
  • Maintaining employee confidentiality
  • Over or underpayments
  • Misclassification of time off; and
  • Tax and compliance issues 

How To Overcome Payroll Challenges

As with the other aspects of basic financial management for small businesses, automating your payroll process just makes sense. 

Automating your payroll allows you to:

  • Reduce human error
  • Save valuable time by speeding up payroll processing
  • Increase the security of records and personal information
  • Make direct deposits
  • Calculate employee withholdings
  • Create reports
  • Keep the required employee records (such as hours worked, payment rates, etc.) that may be needed in case of an audit; and
  • Simplify your taxes

Why Financial Management Is Important for Small Business

According to Business Insider, 82% of small businesses fail due to poor financial management. 

Basic financial management for small businesses is critical because it allows you to:

  • See your profits
  • Have the tools to make wise business decisions
  • Generate accurate reports
  • Understand your cash flow; and
  • Conduct sound financial analysis

Keep your small business operating in the black and running like a well-oiled machine by making the sound decision to automate your financial management processes today.