Setting up a successful business is not an easy feat. It requires tiresome efforts and brilliant minds, particularly on financial management. The difficulties do not end there. In fact, running a successful business means that you now have even more responsibilities on your shoulders. Your employees are dependent on you and any decision that you take will not only affect you but your employees as well. Good leaders always evaluate every judgment with caution. This includes handling business finances.
Financial Management Tips for Small Business
Any business whether it is old or a start-up is made through proper financial records and management system. If the venture is suffering from an economic crisis, then it will be equally troublesome for both the business manager and employees. To save your organization from suffering through this turmoil, we have compiled a summary of financial management tips for small business managers.
1. Bad Planning can lead to failure:
Planning is the essence of achieving any goal that you have set for yourself. A bad strategy or having no financial management system at all means that you are bound to have a disaster. It is always best to plan by having quarterly or half-yearly business budgets. Follow the budgeting closely; this will result in you having a clear idea the expenditures that would come your way and the profit that your business will make.
2. Collaboration of Business and Personal Finances:
When you are running a business, you must keep it as separate from your personal life as possible. This also includes your personal finances. If you are running low on money personally, it could be tempting for you to delve into your business savings. But it could be disastrous for you. You could say that you would put that money back in your business, once you have fulfilled your requirements. Such move could upset the whole budget for the finances related to your venture. If the business runs out of cash, it will a negative impact on everyone including the customers, suppliers and employees.
The situation could also be the complete opposite. You might want to further invest your capital in your business when you are running low on finances. It is advised that you refrain from it. You have your family to support with that money and if you spend all your life savings funding ventures, it is could affect them too.
3. No organized Account System:
One way to track your expenses is to have an organized system to keep track of your funds. Keep the history of your expenses and sales in the form of invoices. They could be digital or in printed form. No business can thrive if it does not record its earnings and investments. Also, it will reduce a chance of a fraud.
4. Late payment by Clients:
It could be that your business is thriving and having successful transactions. But there are clients who will delay payments well past the due date. Beware of those clients as they could put the business into cash flow problems. One tactic is to do due diligence on the new clients before offering credit sales or service. If the client has a history of late outflows, make your position clear with them about delivering the said amount on time.
5. Having no Cash Reserves:
If the business is a start-up, then you must realize that not all your financial plans will be solved with a loan. In fact, your best method is to invest through personal savings or sweat capital. You should know that banks have very stringent loan requirements for small business. In most cases, banks will only give you a loan when they see the founder’s initial investment in the business.
6. Unnecessary spending:
No office needs luxury items if it cannot afford them. Follow the budget you have made and see where you can save money. There is no point in getting mahogany desks for your office room when plywood would do just fine. Just remember, you are setting up your office and not decorating your living room to entertain guests in. If it’s something you don’t necessarily need in office, then it does not have to be there.
Giving your employees basic salaries and amenities in office is your responsibility. But facilitating them way beyond needed, with things that don’t matter is an additional expense. Whether you are a start-up business or own a well set up company, if your profits are not enough to give your employees extra facilities, then you don’t need to. Learn to manage your business expenses.
Not all the decisions that you make will be the best in your life. But to exercise caution during your business dealings is the best way to go. Make the steps given above your mantra to run your organization successfully and avoiding financial issues. Irrespective of the fact that your business is old or new, these financial management tips could be your guiding principles.
Bio: Rachael Everly is an undergraduate student who loves to write on the topics related business, finance and education. Follow @Rachael Everly for further updates.