Every great venture begins small until it grows into a large enterprise but this depends on how well you plan and coordinate your business. Running a small business can be challenging. It is easy to make a mistake that can run at a loss or bring you back to your square one. However, there are financial tools that can help keep you on track without veering off.
By definition, a small business is characterized by its small employee size usually less that 50, lower annual revenue compared to large-scale businesses, or both. They can range from sole proprietorship to partnerships and corporations with multiple owners and sometimes hundreds of workers.[1]What Is a Small Business? Definition, Characteristics, and Challenges – Investopaedia
Small businesses form the backbone of every country’s economy, making up a huge proportion of businesses within the country. According to the US Small Business Administration (SBA), there were over 33 million small businesses in the country in 2023, employing close to 62 million Americans totalling 46.4% of private sectore employees.[2]Frequently Asked Questions About Small Business, 2023 – Office of Advocacy – SBA
Further statistics by the US SBA as of 2023:
- Most businesses are small- 99.9% of American businesses.
- From 1995 to 2021, small businesses created 17.3 million net new jobs, accounting for 62.7% of net jobs created since 1995.
- Small businesses pay 39.4% percent of private sector payroll.
- Small businesses generate 32.6% percent of known export value.
India has the highest number of micro and small businesses of any country, with over 63 million, followed by Indonesia with over 62 million, then Nigeria with almost 37 million, United States with 33.3 million, Bangladesh with almost seven million, and so on.[3]Small Business Statistics in 2024 – USA Today
Despite the huge number of small businesses worldwide, only a few individuals and groups are able to grow their organization to medium and large scale. This is largely due to individual capability and knowledge, government policies regarding business activities, as well as access to business management tools.
Therefore, in this post, you are going to see one aspect of small business management – knowledge of financial tools every small business needs.
Financial Management Tools For Small Businesses
The US SBA has recorded that about 38% of small businesses use specialized software in their business operations. These go beyond the traditional bookkeeping methods and techniques, exploiting the available technology in this age of artificial intelligence.
For the sake of organization, I will show different financial management tools under separate financial management tasks representing the core aspects of financial management for every small business.
1. Accounting tools
Accounting tools help you manage your bookkeeping, generate invoices, and prepare financial reports for your small business. They replace the traditional bookkeeping methods making it easier to record financial entries from sales, and financial disbursements.
Traditionally, this is achieved using a cash book which is a subsidiary book to the general ledger. This can enable you to keep track of how much comes and leaves your business every given time. It can also help you track your performance over time, as well as produce reports as may be requested by investors, banks, or partnerships.
Some accounting tools you should begin adopting for your small or medium-scale business include the following:
- QuickBooks: QuickBooks is a comprehensive accounting tool with accounting features for small businesses like bookkeeping, invoicing, expense tracking, and payroll. It also has premium features like linking to your bank and cards.
- Xero: Xero helps in managing invoices, and inventory, and syncing with your bank for real-time financial data and bank reconciliation.
- FreshBooks: FreshBooks focuses on invoicing, expense tracking, and time management.
- Wave: Wave is a free accounting software with invoicing and receipt scanning capabilities for small, medium, and large-scale businesses. Unlike the other three above, Wave has a free plan for very small businesses that cannot afford monthly subscriptions yet.
- Zoho Books: Zoho Books is also a comprehensive accounting tool for small, medium, and large-scale businesses. Its free plan can accommodate basic bookkeeping, inventory management, expense tracking, and bank reconciliation for any small business.
2. Budgeting
A budget is a financial tool used in setting up estimates for your expenditures over a given time against available assets, money, or expected income. It is how you plan to spend money and how much you apportion for every expense in your small business.
Budgeting helps you plan your expenses rationally without overspending or spending wastefully. It is something every small business would need as they grow to become larger in size and financial capacity.
Several budgeting tools exist that can help you create budgets for your small business easily. These include the following:
- LivePlan: With LivePlan, you can create budgets, forecast financial outcomes, as well as generate a business plan with the help of its built-in AI. LivePlan can also integrate with accounting software like Xero and QuickBooks.
- PlanGuru: PlanGuru helps you create budgets, forecasting, and financial analytics for small businesses.
3. Inventory management tools
Inventory management tools help you keep track of all assets owned by your small business. These include raw materials and products/services listed for sale.
Managing and controlling inventory helps track how your asset flows, either in or out bearing in mind that finished goods can be sold for cash and recorded in the cash book as discussed above.
Examples of inventory management tools you can use in your small business include:
- Zoho Inventory: Zoho Inventory is an efficient tool that can help you keep track of your online and offline orders across multiple channels. It can integrate several platforms like Amazon, Shopify, eBay, etc, where your products are listed and help you track the stock level across multiple platforms simultaneously.
- Cin7: Cin7 is a cloud-based inventory and order management solution that helps keep track of products from creation to delivery, sync with multiple sales channels, and provide you with analytics for your inventory.
- Ordoro: Ordoro is an inventory management tool that helps to streamline and automate shipping, dropshipping tasks, and inventory management, all of which come with running a small business, especially e-commerce.
4. Expenditure tracking tools
Tracking your expenditure is another way to be accountable in your small business. Expenditure tracking helps you monitor and categorize business expenses. This is another helpful way to balance the accounts on your cashbook and general ledger.
These tools efficiently track your expenses often with the help of features like receipt scanning and categorization for your small business. Examples include:
- Expensify: Expensify automates expense tracking with receipt scanning and approval workflows. It also helps track receipts, reimburse employees, create expense reports, and send invoices.
- Shoeboxed: Shoeboxed helps convert paper receipts into data with automatic data extraction for expense reporting, tax preparation, and so on.
- Zoho Expense: Zoho offers a comprehensive range of products for your small, medium, and large-scale business. Zoho Expense allows you to track expenses, automate approvals, and manage receipts.
5. Payroll management tools
Payroll management tools help you automate payroll processing, manage employee benefits, and handle tax withholdings for your small business.
Having less than or equal to 50 employees puts your business in the small-business category. However, if you are in the upper limit, managing payment for these employees, including special employee benefits, and tax management can be cumbersome.
These special management tools come to the rescue in automating the process of payroll management. Examples include:
- Gusto: Gusto manages payroll, employee benefits, and tax filing.
- ADP: ADP offers payroll services, HR management, and employee benefits administration.
- Paychex: Paychex payroll services are tailored to small businesses, including tax compliance and direct deposits.
6. Invoicing and billing tools
These tools help you create, send, and manage invoices and payments from clients. This is an essential aspect of every small business.
Receiving payments from clients via invoice makes it easier for the sender to send your payment and record it into your cashbook for income. The following invoicing tools help you create, send, and manage invoices at your small business.
- Zoho Invoice: Zoho Invoice allows you to create customized invoices, send payment reminders, and manage expenses. Zoho Invoice also allows you to set payment reminders, integrate payment links, and create reports of all payments received.
- Invoice2go: Invoice2go offers simplified invoicing with mobile app support for small businesses and freelancers.
- Wave Invoicing: Wave Income is a free tool for creating and sending professional invoices.
7. Point of Sale (POS) system
With a POS system, you can manage sales transactions easily, as well as track inventory for your products. These devices can accept payment via card, contact, and contactless mechanisms, and also integrate with accounting software for sales records.
Several devices and POS software have been created. While there are many POS systems you can procure for your small business anywhere in the world, here are a few examples of POS systems you can get for your small business.
- Square: Square POS system has integrated payment processing and sales tracking.
- Shopify POS: Shopify POS comes with powerful hardware linked to the Shopify e-commerce platform to help you manage your inventory on your Shopify shop and create reports.
- Lightspeed: Lightspeed POS system has advanced inventory and customer management features.
8. Tax Preparation Tools
Last but not least is tax preparation tools. These help prepare and file taxes to ensure compliance with tax regulations. If you live in areas where tax regulations are seriously enforced for small and large-scale businesses alike, compliance with these regulations will be important in ensuring that your business does not face any tax-related actions.
Examples of tax preparation tools that can help you file taxes include TurboTax, TaxSlayer, and H&R Block.
Why Adopt These Financial Tools for Your Small Business
The world is fast-advancing in technology and artificial intelligence such that it is only wise to try to keep up with the pace. It is technically unwise to waste 100% of effort doing what tools can help you achieve with just 20% effort. This is why trying your hands on these financial tools is always going to be worth the investment.
And for most of these, you can get most of the services for free or at a very low price. You can easily download any variant of these financial apps from your smartphone’s app store, and there are a lot of options to choose from. You should always tailor your choice to what your business needs the most and how much it can financially sustain.
Starting off with digital methods of bookkeeping, inventory management, invoice and payment processing, etc, may seem difficult at first but as you get on with it, they save you a lot of time and money, giving you more resources to put into your business growth and productivity.
