Running a business can be quite hectic indeed, and you could be in a hundred odd places all at once. One of the most important things about running a business successfully is that you should make sure that your are not wasting or squandering your money. Use good financial strategies and you can surely lower your expenses amazingly. Most of the small businesses find it difficult to manage their finances especially when they have no idea about the accounting principles. Money management can be quite tricky indeed as you have to keep your eyes wide open and see what is happening to the company’s finances. Even though you may have a full-time accountant, you should still need to know about basic bookkeeping and money management. It is said that the success of a growing business depends on the efficient financial management of the company by its owner.
Familiarize yourself with accounts by understanding credit, reading bank statements and tax forms, and figuring out accounts receivable and payable. Gradually, try to understand all other aspects of accountancy. You should remember that knowledge about the financial aspects of running a business is just as important to an entrepreneur as knowledge about the product or service that he or she is selling. Do take the time to go through your account books every day which will be able to tell you the day-to-day position. You should be especially aware of the cash flow in your business – the movement of cash in and out of the business. It is important for you to be aware that positive cash flow – more cash coming in than going out – signifies good health, whereas negative cash flow – more cash going out than coming in – is an indicator of poor health of the company. Do make it a point to occasionally review your company’s balance sheet which will tell you in brief the company’s financial condition at any point of time.
Be dynamic and try to change with the times and learn the modern way of doing things. Sometimes, it so happens that, when you stick to the old or obsolete ways it may be costlier as opposed to the modern ways and so switch over to the modern methods.
Keep a sharp eye on your expenses and keep reviewing them regularly and you will be able to cut down unnecessary expenditure successfully. If you keep trimming all that unwanted and unnecessary expenditure, you can reduce your expenses and increase your profitability by at least 15 – 25 per cent. There are many areas of expenditure which can be curbed or curtailed, such as utilities, especially telephone and electricity, stationery, overtime, and other overheads. Do you know why money management is important? Because your whole company and your existence depends on it. And what can be a business man’s nightmare? Shortage of money and hordes of bills to pay – unpaid bills, failure to pay the employees’ salaries, unpaid rent and taxes, and other financial obligations can easily put an entrepreneur out of business.
Here are some quick tips for easy and efficient money management:
Create and follow a cash flow budget
Maintaining and following a cash flow budget ensures control over your expenditure and enables you to manage your income and expenditure effectively. The important points should include projected inflows including amounts receivable and outflows such as goods sold, operating expenses, and payment of loans.
Manage your receivables
You should be able to manage your receivables and try to improve the turnaround time, by offering discounts or incentives for early payments. You can discourage late payments by imposing penalties and interest on late payments. Keep an eye on extremely late payments which are likely to turn bad, and which may have to be written off.
Manage your payables
Keep reviewing your payables and keep a track of them which will help you decide how well you are managing your payables and if you have any old dues.
Cut down on your expenses
Find ways and means of reducing your expenditure wherever possible. The first place that you could start with would be utilities – electricity and telephone and stationery. Proper regulation of expenditure and trimming expenses would directly add to your profit.
Ensure that you make all payments on time – utility bills, taxes, and loan instalments.
Most of the small businesses find it difficult to manage their finances especially when they have no idea about the accounting principles. Money management can be quite tricky indeed as you have to keep your eyes wide open and see what is happening to the company’s finances. Even though you may have a full-time accountant, you should still need to know about basic bookkeeping and money management. It is said that the success of a growing business depends on the efficient financial management of the company by its owner.