Business Finance

6 Easy Ways to Protect Your Small Business Financially

Mar 13, 2021 • 5 min read
Woman working on business finances
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      Managing your money as a small business owner can be complicated, overwhelming, and intimidating—but without a careful eye on your finances, you risk putting yourself and your business in jeopardy.

      This isn’t meant to alarm you but to empower you to take steps today to keep your business safe and growing. You can follow the steps below, regardless of your company’s size or industry, to protect your small business financially.

      1. Review and Update Your Insurance Policies

      One of the top ways to protect your small business financially is with a good insurance policy. Business liability insurance protects your company in the event that someone is injured on the job or on your property. It also protects your business from damage caused by natural disasters—like a tornado—and other unpredictable threats. 

      For many entrepreneurs, insurance isn’t an exciting topic, which means they gloss over their policies when they first take them out. If this is what you did, then it’s time to reevaluate your coverage. 

      Look at your existing policies and make sure they provide the coverage that you need. Do you have flood insurance? What about business interruption insurance? Many business owners were surprised and horrified to learn that their interruptions weren’t covered for pandemics, denying them the support they needed during COVID-19-related closures. 

      Once you’ve reviewed your policies, shop around for better coverage. You may be able to save money while increasing your financial protections with a new and more advantageous policy. 

      2. Take Steps to Reduce Your Risk of Liability

      Your insurance policy can protect your finances in the event of an accident, but you can also take steps to protect your staff and customers within your place of business. 

      In some areas, this can be as simple as making sure that someone shovels snow off the sidewalk each day and keeps the walkway clear of ice. Evaluate your business and look for ways to improve your operations to protect your team. What day-to-day processes can keep everyone out of harm’s way?  

      Some companies and industries are more dangerous than others—but businesses should take every step possible to ensure the safety of their employees and customers no matter the industry. Adding safety measures can prevent accidents—and they can reduce your financial liability and the need to exercise your insurance policies. These simple measures can keep your insurance rates lower while also creating a better work environment. 

      3. Work With a Lawyer on Your Vendor Contracts

      While many business owners worry about litigation due to negligence, several other avoidable scenarios could cause you legal trouble. From copyright issues to contract breaches, you can find yourself in court for a number of reasons. 

      As you start to work with vendors and form agreements with contractors and manufacturers, consider keeping a lawyer on retainer to review the documents and advise you before entering any agreement. A lawyer can assist with everything from a lease contract to a marketing service plan. 

      Remember to keep an eye on the termination clause in any contract you’re considering. Will you be locked into a contract for several months even if you don’t want to work with the vendor anymore? Can a vendor terminate your agreement without notice, leaving you in the lurch? A lawyer can protect your company’s interest—and therefore its finances. 

      4. Update Your Cybersecurity

      Another source of potential risk for your business: cybersecurity, or the threat of hackers stealing information and using it against you. Cybersecurity threats are incredibly diverse. An attack could go after your company credit card information or steal the personal information of your customers. Some hackers use ransomware, where they lock you out of your systems and demand a ransom before returning your access.

      Working with an IT consultant can help you to keep your cybersecurity setup in top working order. Some of these teams can also train your employees to look out for suspicious phishing attacks

      You can also look into cybersecurity insurance, which protects your business from liability in the event of an attack.  

      5. Set Up Emergency Cash Reserves

      As your business starts to grow and turn a profit—even a small profit—take steps to protect your funds with an emergency cash reserve. This “rainy day fund” can protect you if there’s an unplanned expense related to your company or a period where you need to close or limit your potential revenue. 

      These cash reserves can protect your business in multiple ways. First, they can help you to pay off your business credit cards to prevent interest costs and fees. If you are working to pay off a business loan, your emergency fund can prevent you from defaulting on a payment if cash is tight. This can keep your credit score high and keep your business out of collections, protecting your financial reputation for the future.   

      6. Protect Your Non-Liquid Assets

      Protecting your finances means protecting your assets. When you buy something for your company, create a plan to protect it and keep it in good working order. For example, if you keep your company’s delivery van well maintained, it can last longer and you reduce the risk of unplanned auto repair bills from something breaking down. These actions increase the value of your asset over time by costing your business less. 

      Evaluate your top investments and make sure they’re fully protected. This goes beyond insurance—it might mean installing a security system at your brick-and-mortar location to protect your inventory and equipment. It might mean installing hurricane windows if you live in a storm-prone area so your business is safe from a Category 5 threat. 

      Protecting your finances means limiting the risk of great financial costs to maintain or update your assets. 

      Identify Your Current Risk Factors

      Every business has risk factors that could damage the organization’s finances. In some cases, the risk comes from cybersecurity threats and potential customer information exposure. In other cases, the risk stems from assets related to real estate, fleet vehicles, and equipment. Know where your company’s financial value lies and take steps to protect these channels. With the right preparation, you can survive almost any crisis.


      Disclaimer: The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter.
      About the author
      Derek Miller

      Derek Miller is the CMO of Smack Apparel, the content guru at, the co-founder of Lofty Llama, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy,, and StartupCamp.

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