Being an owner of a business, be it a startup or an already established organization, is both overwhelming and exhilarating at the same time. It might become tempting to give the lion’s share of your effort and time to develop services or products, finding customers, or hiring the right employees. However, it is of equal importance to carve out some time to keep a close eye on your business’s financial health and standing. It is similar to how an airline recommends you attach your own oxygen masks before deciding to help other passengers. You might not be able to help your customers out, fulfill their needs, or empower and motivate your employees if you’re drowning in a liquidity crisis.
Financial management is an ongoing process, whether it be a small or a large business. Your objectives will always include developing both long and short-term fiscal and business goals while keeping in mind the tactics to achieve them.
While most small business financial management plans contain elements similar to that of a personal finance management plan- budget creation and allocation, investment strategies, tax calculation, and risk management are a few essential differences. Keeping this in mind, listed below are five tips that will allow you to manage your small business’s finances more efficiently.
Always stay on top of all your deadlines
If you have no idea of your bills’ due dates, you will surely miss out on your payments and find yourself stuck in a financial sandstorm. For example, paying business loans, credit card bills, or vendor invoices on time is crucial to ensuring your business sails smoothly for a long time. Failing to know when your bills are due will set you back with added interest, late fees, or a lowered credit card score. Not to mention, it will ruin your business’s relationships with vendors and lenders. To counter such issues, online accounting software such as Crunch is a viable option. It lets you track all your financial transactions, bookkeeping activities, and invoices while also allowing you to pay your bills on time.
Always remember your Accounts Receivable
Suppose you are offering a line of credit to your customers. You’ll also be well aware that you will not receive any cash for the goods you sell or services you provide to these customers until or beyond the due date. You’ll quickly forget about these accounts receivable after some time. Therefore, to manage your money efficiently, you must always record the funds that customers owe your business and pursue these payments ASAP!
In order to record these payments without a hassle, do them in a separate book. If you keep a single book to track all your finances, these accounts receivables will surely get away from you. While tracking is vital, pursuing and receiving payment is more important. You can follow up on these payments by mailing invoices and late payment notices to such customers. You can also offer them an early payment discount if you need money before the due date.
Keep business and personal funds separate
Do you have a separate bank account for yourself and your business? Even though there isn’t any need to separate personal and business finances, doing such a thing will ensure proper money management. Plus, as far as trackability goes, business bank statements are helpful for monitoring spending, reconciling your books, or tracking profitability.
When you mix up your business and personal finances, it may lead to overspending, disorganized records, or missed business growth opportunities. Tracking deposited and withdrawn funds become extremely hard, making it tricky to monitor outgoing and incoming money. You might also get tempted to dip into your business funds to buy personal items or pay for personal expenses. So, avoid falling prey to your desire to buy that expensive car with your business funds!
Manage your inventory properly
Do you store too much inventory on-site? If so, then it will probably end up collecting dust inside our warehouse. Or are you constantly in need of goods that are in high demand? Improving your inventory management will let you save tons of money when ordering the right amount of inventory.
The first step is to track the amount of inventory you have at the moment to avoid ordering too much or too little. Another crucial thing to do is to record every sale and inventory purchase. It will allow you to know your demand and which product you need to order more.
Keep backup funds
Enforcing money management practices will significantly improve your cash flow and revenue. However, there will be times when the unexpected will happen. And you’ll have no money left to cover an emergency expense.
Keeping some backup funds or a small cash reserve will help you tackle your financial issues when you’re in a pinch. Open a business saving account to start a cash reserve. Depositing a cash amount of as little as five to ten dollars every day can amount to hundreds of dollars in a year.
Suppose you want to uncomplicate your money management. In that case, you’ll have to keep all your business accounting practices up-to-date, which means following the latest accounting best practices and educating your employees to do the same. The more you understand your business’s cash flow and finances, the better prepared you will be to make intelligent financial decisions. While the financial management tips mentioned above will get you started, nothing will do you more good than being hands-on with your money!