What causes financial stress?
We all deal with financial stress. But it can be magnified if you’re a business owner, especially because you need to generate enough revenue to support not only yourself, but your employees too, says financial therapist Lindsay Bryan-Podvin of Mind Money Balance. This additional responsibility can be a major source of stress.
Another cause of financial stress for business owners? Less-than-ideal habits and other symptoms of poor financial health, which can start to show as businesses scale, Bryan-Podvin adds. For instance, she's seen some business owners skip paying themselves altogether to keep a contractor on payroll—suggesting they couldn’t actually afford the contractor in the first place.
That's just one of the many reasons we put together a free business survival toolkit, with detailed information on the most important steps any business owner can take to build a more resilient foundation for their business.
How does financial stress affect your health?
The health effects of financial stress are many. While the connection between financial stress and mental health is readily apparent, the chronic stress that can arise in tough financial times can wreak havoc on both mental and physical health, Bryan-Podvin notes.
Indeed, the Mayo Clinic points out that it can raise the risk of mental health problems such as anxiety, as well as physical symptoms like headaches and high blood pressure.
“We can all have a stressful day, but when our bodies don't get that break from stress, that's when we can develop chronic problems,” Bryan-Podvin says.
How does financial stress affect the workplace?
As you navigate money concerns, you might unwittingly offload your stress onto your employees. After struggling with this extra stress, your employees could very well quit—which can add to your financial stress.
“The cost of hiring somebody new costs more, both in time and in financial resources, than it does to maintain an employee,” Bryan-Podvin points out. According to Gallup, replacing an employee can cost up to two times their annual salary. In short, small business mental health matters for your workplace and your bottom line.
How to deal with financial stress as a business owner
Chances are, if you’re reading this, you’re wondering how to not stress about money. But financial stress is unavoidable, especially in today’s economic climate. The good news is, you can take steps to cope with financial stress. Here’s how.
1. Get clear on your numbers
A good first step toward managing financial worries is knowing your numbers, which allows you to pinpoint where to cut spending, how much you need to make to meet your goals, and more.
If getting clear on your numbers requires wading through stacks of physical checks, invoices, and other paper documents, consider a digital solution. BILL, for example, gives you full transparency into your workflows and cash flows, empowering you to make the best decisions for your business.
2. Bulk up your emergency fund
Another way to help keep financial problems and ensuing mental health issues at bay is to save money for supplier fee hikes, equipment repairs, and other unexpected business expenses.
While Bryan-Podvin advises individuals to allocate 3 to 6 months’ worth of expenses to an emergency fund, she recommends businesses set aside 8 to 12 months’ worth. “Business ownership is just so much riskier,” she says. “If business owners have to say goodbye to their business, we don't want them to have to say goodbye to their home as well.”
3. Beware of the sunk cost fallacy
The sunk cost fallacy is a phenomenon that occurs when you invest so much time, money, or energy into something that you struggle to give it up, even when it doesn’t benefit you—causing you undue stress in the process, Bryan-Podvin says.
Say you offer 5 products to start. Since they sell so well, you offer 10 more. But you realize that you can’t afford to offer 15 and should go back to selling 5. The sunk cost fallacy might convince you to keep selling the 15 items regardless. In these moments, stepping back and taking a hard look at your numbers can help reduce your financial stress in the long run.
4. Unlock the power of automation
Manually tracking your payables, receivables, employee expenses, and corporate spending can get really messy, really fast. A solution like BILL can automate these processes, eliminating inefficiency and human error—and all the financial stress they bring.
5. Be transparent with your employees
How you communicate with your employees about company finances can have a major impact on their well-being. And since their well-being can affect their performance—that is, your business’ performance—your communication style has implications for your mental health too.
A seemingly casual comment like, “it’s been a rough year,” might send an employee into a panic over whether they’ll be out of a job soon, Bryan-Podvin explains. Instead, convey enough details about your company’s financial situation to keep employees from assuming the worst.
“You don’t have to give employees the full bank statements,” she says. “But try something like, ‘Last month was slower than what we wanted, but if we meet this milestone, we’ll be fine.’”
6. Budget for your health
“Health is wealth, especially for business owners,” Bryan-Podvin notes. “Your health really determines whether or not you can show up, lead, and help your team to succeed.” Plus, there’s evidence that your physical health could impact your stress levels.
Prioritizing your health means budgeting not only time for self-care, but money as well. Remember to budget for gym membership, health insurance, and anything else you need to take care of your physical health, Bryan-Podvin adds. Your future self will thank you!
7. Grab our free Business survival toolkit
What's the best way to reduce financial stress? Improve your company's financial resilience. That means taking control of your cash flow, accelerating your inflows, and slowing your outflows with the visibility you need to make solid financial decisions.
Learn how to do it with our free business survival toolkit, with 5 immediate steps any business owner can take to:
- Identify new cost-saving opportunities
- Evaluate pricing strategically
- Strengthen supplier relationships
- Boost customer retention
- Leverage technology to improve efficiency
How BILL can boost your business’ resilience
Financial stress is part and parcel of running a small business. But streamlining your processes, empowering your team, and practicing self-care can boost your resilience to financial stress so you and your business can succeed for years to come.
Manage your small business with greater confidence—and less stress—when you automate your financial operations with BILL.
