Some people might find it very intimidating to think about their business finance management and get them in order. They probably need an expert mapmaker or GPS programmer, or both. But is it true?
Firstly you have to decide where you want to see yourself in the future, your goals. Then take charge of finding the best possible route to attain your goals effectively and efficiently.
You might reach some goals in years or decades, but having your finances in order would give you a different kind of confidence and a sense of accomplishment.
Business financial management might look like a spinning wheel, a complex task where you might not know where to start and where to end but consider initiating it sooner than later.
Now let us discuss how exactly you can carry out your business finance management properly.
SHORT-TERM AND LONG TERM GOALS
The first step of business financial management is to establish a list of short-term and long-term goals, both on a paper or a spreadsheet, anything that suits you.
For short-term consider Keeping the extra finances saved living for at least three months; you should keep your credit card charges to the extent you have the potential to pay; create a budget, and follow the same.
For the long term, save at least 10% of your gross income to use after your retirement. Especially if you still have decades to continue working.
INVEST IN GROWTH
Besides saving for short term and long term goals, it is high time to keep some money aside for investments to look for growth opportunities; let your business blossom and financial health bloom; you should always keep looking into the future.
Every small business that is willing to grow, be creative, and draw the finest employees, depicts that it is also thinking of making investments in the future. The employees will appreciate the growing business they would be working for, and the customers will be satisfied with increased and better quality services.
Investing in your business is always better than spending money on your matters.
HAVE A GOOD BILLING SYSTEM
Every business needs to manage its finances and keep track of their cash in-flow and out-flow to run healthy day-to-day business tasks.
Many stagnant invoices can cause problems in the cash flow and can even land your business in failures. There probably are some customers of your business (and every other company) who are always late paying their bills; you can not fight them off, so what to do next?
Be innovative with your billing system; instead of sending them those boring and monotonous phone calls and messages, try to shift to the “2/10 Net 30” approach. It means offering a 2% discount to your customers if they pay you within ten days of billing; if not, their full amount is due in 30 days.
MANAGE TAX PAYMENTS
If you have a hard time saving for your quarterly estimated tax, you can make monthly payments instead; it’s like treating your taxes like any other monthly business operating expense.
SCAN YOUR BOOKS
It is a regular and a crucial practice. Try to monitor your financial books each day or at least each month, even if you have a bookkeeper. It will minimize or prevent the financial crimes occurring underneath your nose.
Do not underestimate bank reconciliations and reviewing outstanding invoices each month. Failing to do so could land a business to waste, especially when a bookkeeper is involved.
PAY ATTENTION TO THE EXPENSES BUT ALSO RETURN ON INVESTMENT
To get a clear picture of your investments, analyzing which one is worth continuing and which one is not serving, you need to pay attention to your expenditure and Return On Investors.
Pay attention to your return on investments after every expense. Failing to do so could cause the owner financial troubles and an imbalance in cash flow.
OPEN A SEPARATE BUSINESS CURRENT ACCOUNT
All the private firms have to keep a separate bank account for their business by law. Even though sole proprietors do not have to open a different bank account for their business, doing so could save them resentments and make the financial processes a lot easier, considering factors such as transaction fees, withdrawal fees, introductory fees, etc.
OPT FOR CLOUD ACCOUNTING SOFTWARE
Even small-scale businesses invest in some cloud accounting software; it could be the most compatible option for the entrepreneurs who do not prefer to hire an accountant or a bookkeeper due to their costs or any other reason. Flourishing limited firms uses cloud accounting software in conjunction with professional small business accountants to fulfill all the tax and accountancy obligations.
Some common examples of such software are Xero, QuickBooks, and FreeAgent. All of them offer a free 30-day trial so that you could look for the best option available to you.
SET UP GOOD FINANCIAL HABITS
Carrying out internal financial protocols, even those that might not even look significant, such as selecting a specific time to update financial data, can travel a long road to guard your business’s financial health and mitigate the risk of fraud and theft.
Having weak internal protocols can let the employees steal and commit fraud, ultimately leaving legal troubles.
If you are not looking ten to fifteen years ahead for planning, you fall behind in the competition. You might face continuous obstacles in the business and probably would deal with them more comfortably, but you have to plan for the future for finances.
NEGOTIATE WITH SUPPLIERS
You can ask for discounts from your supplier while placing bulk orders, you could use your history of timely payments to negotiate, or you could team-up with other small businesses to make bulk purchases at lower rates.
You probably should consider refinancing your loan if you pay higher rates of interest than in the current market; consider getting a loan with more manageable monthly repayments. You should prioritize the payment of debts for which you have given a personal guarantee.