When you want to monitor and track your company’s finances, the right approach will be a game changer. No matter how much you refuse you don’t, but as a small business owner you will surely need help managing your finances. In most of the scenarios, you won’t have much time when operating your company, and your only concern will be how to expand your business. Initially for entrepreneurs and small business owners, managing cash will be a secondary concern. However, you might not know this, but simplifying how you manage your money is a definite way to raise your chances of success and development.
Whatever your situation, having a successful business depends on understanding financial management. Since your margins will be low initially, you will want to do all you can to save money, even if it’s just a few dollars. In light of this, let’s look at some tips that will help you optimize your business’s finances and get things in order!
1. Track Your Expenditure
How much money do you spend daily, week, or month? If you have never kept track of your expenditures, you might be acquiring unnecessary debt. Additionally, it may result in financial misconduct or overspending. Most company owners have many bank accounts, including checking, savings, and credit accounts. So, one way to track your expenditure is to learn how much money you have taken out of each of these accounts. You can easily do this by visiting your bank once or twice weekly and requesting bank statements or request online. Once you know what you have spent, you can also use accounting software to record and manage business spend.
Of course, if this is too much for you, you can always hire an accountant with a business administration degree in finance, accounting, or any other related field. These professionals have the education, background, and experience to help you tackle the nitty gritty of financial management.
2. Manage Your Inventory Properly
Do you order more merchandise than your company can handle? Or are your best-selling items running out and driving customers to your rivals? You can prevent underspending or overpaying on inventory by optimizing your inventory management.
Keep a close eye on your company’s inventory to prevent getting caught between having too much or too little. So, monitor your inventory, keep an eye on every purchase and sale, and order accordingly. Ultimately, you can get most of your finances in order if you know how much inventory your company needs!
3. Always Have a Cash Reserve
There is no doubt that effective money management techniques will significantly increase cash flow. However, at the times of crisis, you might not have enough money during a difficult financial period. You can get through the tough times by keeping a little financial reserve.
If you haven’t already, open a savings account with a bank of your choice. Put around $1000 to $1500 into this account each month, and after twelve months, you will have $12,000 to $18,000 set aside that you can use at the time of crisis.
4. Don’t Forget About Creating a Budget
Creating and monitoring a budget for your small business will simplify how you handle your finances. It will allow you to set income and spending targets, removing the guesswork. You must create a budget to list the costs necessary to run your business effectively.
After all, you can quickly and effectively regulate your spending habits if you know how much money you have and how much you can spend on your business. A budget aids in predicting the anticipated income for your company. If the revenue is less than anticipated, reduce additional spending to boost your income.
5. Keep Your Business and Personal Accounts Separate
Do you maintain separate bank accounts for your company and personal expenses? Even though it’s not required, not separating your business and personal finances can lead to great confusion. Combining the two accounts will ultimately result in overspending, missed possibilities for growth, and unorganized records.
Let’s say you combine your business and personal finances in a single account. In such instances, you might use money from your personal account to pay for expenses and vice versa. So, it is best practice to keep both accounts separate to ensure you have money left whenever required, whether for personal or business needs!
6. Keep Track of Payment Deadlines
If you don’t know when your business-related bills are due, you risk running out of money when paying for things like company loans or credit card bills. Not remembering your bill due dates can result in late payment fees, penalties, poor credit ratings, and negatively affect lender-client relationships.
Therefore, you must keep track of your payment deadlines. One easy way to do this is to set up reminders on your smartphone. You can also utilize accounting software and mobile apps to keep track of your bills. Some software and apps allow you to automate bill payments, avoiding the hassle of visiting the bank and paying them manually.
7. Outsource Bookkeeping Tasks
Outsourcing your bookkeeping is another way to organize your company’s finances. It will help ensure that all your financial records are up-to-date and accurate. Consider outsourcing your accounting operations to a third-party managed service provider rather than engaging an internal bookkeeper.
You might argue that employing a single person is preferable to hiring a large third-party services provider. However, a managed service provider will likely have access to expertise that one person won’t. So, try outsourcing if you want to simplify your finances and make significant financial savings simultaneously.
The Final Words
Regular monitoring and reporting are crucial to properly managing small business finances. For instance, tracking turnover is a simple performance indicator. Never forget that your company’s profit margins are essential to its existence! In the end, you will end up making more money if your profit margins are higher. So, follow the financial management tips shared above, and you will be well on your way to tackling any difficult financial times in the future.