We have often heard that a business owner wears many hats. i.e They are acquired with all the work in the business. They have to handle the manufacturing, the trading, the sales, the maintaining, the customer and everything else. They have to perform all the important chores and they even have to perform the small chores.
Introduction: Manage Business Finances
The biggest problem that a business owner has to face is the problem of money and time. They don’t have enough money to hire a team and they don’t have much time either as they have to handle all the business chores by themselves.
Related: Top Money-Saving Tips for Small Businesses
Finance has been found to be the sector in which most business owners struggle. The reason why a business is going successful is because of your talent and skills in producing the product or proving the service. And if you are not good with financing, this small task can feel like a hard chore and a real headache. This can become one of the factors affecting productivity of your business.
If you are managing your finances the wrong way, this will affect your business in the long run. The biggest factor that contributes towards the failure of the business is the finance part. There comes a time in the lifeline of a business in which they don’t have money to run the business anymore and unfortunately, they have to shut down the business.
Education
The most important thing that you need to do here is to educate yourself.
When we learn because the world tells us to learn, we make a living out of that education. But when we learn because we want to learn or for a specific purpose, you can make millions out of it or in this case you can save tons of money. Therefore your finance management project execution should start by learning the basics of finance management, simple accounting, how to apply for a loan or how to draft financial statements, etc. By learning the basics you are granting your business a stable financial future.
As stated by the co-founder and principal of Upsourced Accounting, “There is nothing more terrifying, costly or risky than showing up at your accountant’s office at the end of the year with a shoebox of receipts and nine of your 12 bank statements. It is impossible to overstate the importance and benefit of properly tracking your financial information throughout the year.”
The finance of your house has no effect on your business but it cannot be stated otherwise. The finance of your business has a huge impact on your house or your personal life. You can at least have a monthly overview of whether you are making a profit or loss if you manage your accounts efficiently. Therefore, you should put this in your financial management project scheduling to prepare a report of the accounts at the end of each month to have an overview of where your business stands.
You would be able to do nothing if you do not know the basics of accounting, so learning basic accounting is the first thing that you will do.
Apart from that, here are 5 tips that will help you in managing your business finance effectively:
Implement a good financial strategy:
Like every class has that one student that is always late, all the businesses have that one client that never pays on time.
When the cash on hand is low, a late payment can act as a liability. And if you have more than one client that pays late payments, this could be dangerous for your business. If you wish to avoid falling into financial problems due to this reason, you should probably change your billing and payment terms.
The easiest problem with this solution is by providing a discount. Make a limited time offer as the telesales people do. You can offer a 5% discount on instant payment and a 2% discount if they pay under 30 days.
The clients will get the product or service at a lower rate and if they are buying for trading, they can get extra profit or they can transfer the incentive to their client and can offer it at a lesser price. This incentive will make most of your clients regular with payments. As a great project starts with a project proposal, you can use this proposal to start your financial management and therefore you will not face the crisis of low or no cash on hand.
Don’t mix personal and business expenses:
According to a study, A large percentage of microbusiness owners have dipped into their household income to solve their business’ cash flow problem, by delaying or reducing a salary or skipping a paycheck altogether.
Well, it is true that household has no impact over the business financially, but it can not be stated otherwise. All the decisions that you make in the business have a significant impact on the household.
Moreover, there is no reason to mix business and household accounts. You should not include your personal tax issues, personal liabilities or any jumbled household accounting records into your business. The project scope of household accounts and business accounts should be totally separated.
Use cloud based software:
A study found that businesses that rely on consultants or accountants are more likely to have cash flow problems than those that use excel to manage their accounts. But the days of using excel to manage accounts are long gone.
You can now use software that is designed for the sole purpose of maintaining accounts of your niche. There are tons of software out there, you can choose the right one for yourself according to your finance management project roadmap.
This will ensure that you are managing your accounts effectively. The main benefit that you get is that it provides optimal convenience. You can view or edit your financial data anytime and from anywhere. You no longer have to wait to get to the office to update your accounts.
Plan your taxes:
Taxes are the duty to be paid. But, if you pay the taxes on a yearly basis, you can face financial drawbacks.
The most convenient way of paying the taxes is by paying them quarterly. If you are not able to gather the quarterly amount, you can simply consider it as a monthly expense and you can side the amount then and there only.
Make a reserve of the amount every month and then you can pay the amount on the quarterly basis so that your taxes can become more of a simple and regular thing rather than being a headache or a payment that is gonna set your finances back.
Focus on your big expenses and on the ROI:
Measuring the expenses and the ROI can give you a clear picture of which investment is fruitful for you and which investment you should not take or you should discontinue then and there.
To have fewer problems in your business finance, you should be wary about your big expenses and your investments.
You should focus on the ROI that comes with each of the investments that you make and you should also consider the fluctuation rate of the money. Not doing so will lead you to lose money on irrelevant or bad bets. Invest your hard-earned money at the safest and the best possible place.
Author Bio:
Shyamal is the Founder of SmartTask, an online work management tool that’s helping teams be more productive by having clarity on who’s doing what by when. Has a penchant for researching and sharing strategies that could benefit a team’s productivity.
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