Do you want to gain control of your business finances? Understanding the status of your financial affairs is an excellent way to ensure that expenses don’t get out of hand. It helps you make sure that cash keeps flowing in and not out of your business.
When you stay on top of business finances, you can avoid unexpected business debt. Plus, you’ll have enough cash to invest back into your business and help it expand according to your needs. This article will give you various tips to help you manage your business finances better.
- Make sure your accounting processes are streamlined and properly managed.
You should hire professionals like the Silver Peacock accounting firm to keep your accounting processes managed. Or you can opt for accounting software. It is crucial to make sure that you track cash flow through accurate records of income and expenses.
- Always review costs.
Make sure you track all expenses related to your business. You might not be aware of it, but costs can pile up quickly. When you review your expenses, you can fine-tune your costs and make sure they only go to things that matter.
- Formulate financial projections.
An important part of your business involves making clear and reasonable financial projects. Create a business plan that allows you to anticipate and handle possible challenges in the future.
- Don’t be careless about invoicing.
Don’t slack off. In business, you have to send out your invoices immediately after you have provided your products and/or services. In addition, you should make sure to reference invoice numbers and double check these with payments made.
You can also set a payment term for invoices sent. For instance, you can set a period of ten days. In this way, payments won’t be forgotten or even lost. If payments haven’t been delivered, follow up on your invoices. This is made easier by using email templates or follow-ups through text messages.
- Keep personal and business bank accounts separate.
Are you mixing business finances with personal ones? This is a recipe for disaster. Make sure you have a separate bank account for your business. It will help you gauge whether you’re profitable or at a loss. Plus, you can keep track of your business expenses easily.
- Legal fees? Pay a reasonable amount, and make sure it doesn’t get out of control.
If you need legal help, research the specific industry to know about average costs per hour. To manage legal fees, make sure you and your lawyer’s expectations are clear. You can also opt for the most cost-effective payment scheme. For instance, if you think per-project costs are better than hourly modes of payment, then opt for the former.
Also, you can ask your lawyer if payments can be deferred until funding is available for the project. If there are simple necessities you have to abide by, then consider legal documents that are DIY. These are available on the websites of government and authorized institutions.
- Ensure you always have enough capital.
Typically, business owners dream of having a good life without realizing they don’t have enough capital to get them through the beginning or startup phase. To avoid this, make sure you have saved up to 3 to 6 months worth of living expenses in addition to 3 to 6 months worth of business expenses. Plan for the worst, thinking as if you won’t receive any revenue for the first couple of months.
- Don’t spend too soon.
Don’t spend too much on business cards, marketing materials, inventory, cars, or even sign contracts before actual revenue has poured into the business. Plan and deduct your expenses wisely, making sure you know its corresponding return on investment. Going big on expenses would lead to a cash flow blockage.
- Try renting out instead of buying altogether.
Leasing the equipment you need in business might be better. It helps prevent shelling out money for maintenance costs. It even enables you to avoid overpaying on equipment that is necessary only for a certain period of time. Renting office space can also be a better option compared to buying the place outright. Expansion and relocation will be easier when you rent your space.
- Avoid waiting for a lengthy period just to get a loan.
One big mistake is seeking out a loan when your financial state is in trouble. This is the moment where you have the least chance of getting approved. Consider getting a business loan when your financial status is excellent. In this way, the procured funds can be used as an emergency line of credit or for expansion.
- Make sure traveling costs are kept to a minimum.
Travel costs, including hotel stays, are there to help you go through meetings. They’re not meant to keep you inside luxurious accommodations that your business can’t pay for. This sets a bad example for your employees. Plus, it slashes out as a huge cost to your business with little to no return.
In Conclusion
Tracking the flow of cash (both in and out) in your business is an excellent way to make sure you are on top of everything. Keep expenses to a minimum and make sure you shell out cash only for the essentials. Finally, consider hiring an accounting professional to make sure your money is appropriately managed and accounted for.
