Every company, big or small, is always concerned about one thing i.e. managing money [Money Management]. Proper financial management is crucial to surviving a volatile economy and the industry competition.
Small businesses, especially, need to exercise caution with their financial decisions from the very beginning. It takes more than just a good idea to run a business.
Use the following Money Management tips to run your Small Business successfully
Every business needs a financial structure that generates a profit to stay credible. Entrepreneurs need is to be equipped with good money management abilities to turn their venture into a success story.
While there can be many different challenges when starting and managing a small business, money concerns top the list for most small business owners.
There are many ways you can give your business a financial overhaul by modifying your operations processes, but there are also some easy things you can do in the day-to-day management of your business to improve your finances.
Here are few steps through which you can provide a proper money management in your business-
1. Start Budgeting
If you have a business plan, you should also have a budget. A budget is a guideline that helps you fix any holes in your cash management system.
Track expenditures and revenues, allocate funds to necessary spending accounts, and most importantly, watch your savings.
Without a budget, you are driving blindfolded. That is why it is critical that you sit down and hammer out a plan to keep your company progressive.
2. Focus on saving money
Once you have a budget in place, one critical area of importance you need to focus on is saving money.
There are tons of ways your business can save money by reducing unnecessary expenses.
It is not just about stashing away what you earn from your business. It is about being smart with your money.
The money you save from buying used instead of new can be passed onto more important areas of your business. Remember, you need to be smart with your money.
Having a reserve fund or cash In-hand to handle unforeseen business costs is the smart way to operate. Saving money smartly will help you do just that.
3. Hire Professional Help
Everyone needs help, especially a budding entrepreneur interested in making a huge success of his venture.
Sometimes, it pays off to engage the services of an expert, even if it is on a part-time basis.
They can help you determine where your business is, where it is heading by using and analyzing your data. Make sure you hire someone you trust, though.
Whether it is tax planning for the next financial year or payment for the current year, their expertise can go a long way in guiding you and bringing you peace of mind.
4. Create Strategies to Boost Cash Flow
Managing your money is more than just maintaining it. You also need strategies to help you boost cash flow and guard against times when business is slow.
Just like saving money, there are multiple ways in which you can increase the amount of cash flow.
For example, you can provide discount incentives to customers or develop a rewards program to encourage customers to pay early.
You can also add additional services in order to broaden your market appeal to customers within your industry. You can even secure a line of credit for times when business is slow.
The point here is that there are multiple ways to boost your cash flow in order to manage your business’s finances and achieve success. Business might be about creating great products and services.
But if you can’t pay your bills, you could be out of business. Manage your money wisely, and build a healthy business that benefits your customers, employees, and more importantly you.
5. Educate Yourself
One of the first things that you should do is educate yourself about the various aspects of finance. For starters, learn how to read financial statements (if you do not already know how).
This is one important statement that tells you all about your money where it originated from, how many hands it changed, and where it is.
You should know basic topics such as financial statements. Financial statements contain 4 essential details – cash flow statement, income statement, balance sheet, and statement of shareholders’ equity.
The cash flow statement analyzes operating activities, investments, and financial in/outflow.
The balance sheet provides information related to the company’s assets, liabilities and shareholder’s equity.
The income statement reflects the revenue earned within a specific period of time. Shareholder’s equity represents the amount by which the company is financed through common and preferred shares.
6. Separate Personal and Business Finances
Always keep your personal and business finances separate. This entails getting a business credit card and putting all related expenses on it.
This should help you track your outlays and keep you in control.
You will also do well in opening a savings account dedicated to your business, wherein you can transfer a certain amount of money from each payment that you receive and gradually build a considerable corpus.
You can use this money to pay taxes. There are so many reasons not to mix your business and personal accounts, including tax issues, personal liability, and jumbled accounting records, just to name a few.
When things get tight, resist the urge to secure your business finances with personal funds because it will surely create a mess you will have to deal with later on.
The best way to maintain a clear separation of your expenses is to set a personal budget and a business budget.
Adhere to them strictly and separately so that credit cards and loans for your business do not get used for your personal finances and vice versa.
7. Cut Costs
It is important that entrepreneurs stay tight-fisted to keep their expenses in check without hampering customer satisfaction. This, especially, holds true for small businesses.
Every business endures 2 types of costs – fixed and variable. While fixed costs have to be borne irrespective of whether your business is making money or not, there is scope for savings in variable costs.
For example, instead of buying costly branded software, you could work with free, cloud-based, open source software, which is equally good.
Conduct free online calls, video conferences instead of traveling lost distances. You could also try bartering your services with other professionals and cut costs.
8. Invest in Cloud-based Accounting Software
While you can definitely download regular accounting software to manage your finances, it will never give you the kind of convenience cloud-based accounting software can.
The web-based software provides you with real-time insights as most allow you to store, update, track and access data from anywhere at any time.
Whether you are at home, office or are traveling, you can conveniently work with your data from anywhere you like. It is error-free, hassle-free and dependable.
9. Monitor and Measure Performance
It is crucial that you, as a business owner, keep tabs on the movement of your money, especially when large amounts are involved.
Keep looking at your company’s financial performance in comparison to the past financial statements to project your future revenue, expenses, and cash flow.
While owning and running your own business can be exciting, it can also be nerve-wracking, especially when it comes to handling finances in a lucrative manner.
Do not let your business suffer due to poor money management. Keep the above tips in mind and give your venture a bright future