Every business, large or small, always struggles with one thing. That is, keeping a track of and managing its finances. It’s also one of the most vital management areas as it is a given that “cash flow” is the lifeline of every business.
Proper financial management is critical in order to survive a volatile economy as well as the industry competition. Even a small mistake or lack of knowledge and resources can be problematic and may burn a hole in the pocket of every business owner.
Small businesses especially, have to exercise caution with all their financial decisions right from the very beginning. An owner needs more than just a good idea to run their business. They need to have a proper financial structure which can generate profit in order to stay credible.
Entrepreneurs should be well equipped with excellent money management skills so as to turn the venture into a success! Effective financial management is crucial for a business to survive and grow. It includes organising, planning, controlling and monitoring the financial resources to attain the business objectives.
Excellent financial management can assist business owners to make effective use of their resources, gain competitive advantage, fulfil commitments and prepare for long-term monetary stability.
Proper management of finances should become an integral part of the vital processes within the business and should be involved in the ongoing planning. However, not all business owners are adept at handling the finances. But that does not mean that all hope is lost.
Business owners may feel that their finances are intricate and baffling, but with the tips mentioned below they can surely gain control on them.
- Having a Clear Business Plan
A proper and clear business plan will always establish where your business is and where you want to grow in the next few years. Your plan should provide details such as how you’ll be financing the business and all its activities, how much money you’ll require and where it will come from.
- Monitoring your Financial Position
As a business owner, you need to monitor the progress of your business on a regular basis. Daily, you should keep a track of how much money you have in your bank, how many sales the business is making along with the stock levels. You also need to review the position of your company against the targets that are set in the plan on a monthly basis.
- Ensuring Customers are Paying you on Time
Businesses can quickly run into major problems due to delays in payments by the customers. In order to reduce this risk of late or non-payment, you need to ensure that the credit terms and conditions are obvious from the outset. You should make it a point that you quickly issue invoices; the ones that are clear and accurate. Make use of a computerised credit management system as it would help you in keeping a track of all your customer’s accounts and in turn make your job easy.
- Knowing your Day-To-Day Expenses
Even the most profit making company can face complications if there isn’t enough cash so as to cover the day-to-day expenses, such as wages and rent. You have to be aware of the minimum your business requires in order to survive. Also make sure that you don’t go below it! Whilst there are potentially hundreds, if not thousands of potential expenses your premises, particularly London office space, will like be amongst your highest costs.
- Keeping Up-To-Date Accounting Records
If you aren’t keeping your accounts up-to-date, you can probably run into the risk of losing all your money by failing to keep up with your customer payments or not realising when you need to make payments to your suppliers. Make use of a good record keeping system that will help you track all the expenses, creditors and debts. It will also automatically apply for additional funding, thereby saving your time and accountancy expenses.
- Meeting Tax Deadlines
If you fail to meet your deadlines for filing tax returns and other payments, you can incur fines and interest on them. All these are unnecessary expenses for your business, which can be easily avoided with the help of some planning, if made beforehand. Keep accurate records because it can save your business loads of time and money. You can also be confident enough that you are only paying the tax amount you owe. Thus, it is vital that you meet all your obligations on the right time.
- Becoming More Efficient and Controlling Overheads
Are you operating your business at its most efficient? Saving your energy and therefore money can take place if you’ll implement changes in behaviours and make use of existing equipments more efficiently. This is one of the best and easiest ways to reduce your expenses. Areas to take a look at in an average company usually involve lighting, heating, air conditioning and office equipments.
- Controlling Stock
Effective stock control will ensure that you are having the right amount of stock available at the right time. This in turn makes sure that your capital is not tied up unnecessarily. You can put systems in place to keep a track record of all your stock levels. Taking control of this will assist you in freeing up the cash, whilst having the right amount of stock available. If you aren’t willing to purchase your own warehouse to stock the inventory, many businesses are there who have a warehouse to rent London. You could perhaps take a warehouse for rent, instead of putting your money in purchasing an expensive one.
- Acquire the Right Funding
It is vital that you select the right type of finance for your business. Each type of finance is designed to meet different needs in different ways. Small scale businesses generally rely on personal funding and business overdrafts. However, this may not be the best kind of funding for businesses running on a larger scale.
- Tackling Problems When they Arise
It can be very stressful to face financial problems as a business. However, there is help and advice available through which you can tackle them before you start finding it difficult to handle. Thus, seek professional advice as soon as possible. There are certain initial steps which you can take in order to reduce the impact, such as tackling priority debts before and later on assessing how you can enhance the cash flow of your business.
Owning and running your own business can be really exciting as well as it can also be a bit nerve wracking. This is especially true when it comes to handling the finances in a lucrative manner. Thus, do not let the business suffer because of your poor monetary management. Give these tips a shot and you’ll for sure see your venture having a bright future!