How to manage your business finances

by Susan Paige on August 23, 2018 · 0 comments

While securing new customers, taking care of branding, and networking can all play a part in the success of any commercial venture, the lifeblood of your business is money management.

In order to weather the storm of difficult times and to prosper in the good times, you need to make the right financial decisions and set up a system of financial management that is effective and efficient. Whether you’re a transformational leader like Keith Krach or a first-time entrepreneur striving for success with your first start-up, without an ability to effectively manage your finances, you won’t get anywhere. To help you get to grips with the business of money management, here are six useful tips for success.

Learn to read financial statements

Education is usually the foundation of any new venture, and when it comes to financial management, you need a sound basis of knowledge. One good starting point is to learn how to interpret financial statements. These will provide you with essential information about your finances and usually include three components:

  • Cash flow – this offers analysis of investments and turnover
  • Balance sheet – provides information on assets, liabilities and shares
  • Income statement – tells you how much money was earned

By learning to read your financial statements, you will be able to tell at a glance how well your business is doing, which will prove an invaluable skill as your business grows.

Keep personal and business finances separate

It is a golden rule that you should always keep your personal and business finances separate. One way to do this is to set up a separate business credit card that you can use for all business-related expenses, helping you to maintain separation and to keep track of your purely business-focused outgoings. It is also a good idea to set up a separate savings account related solely to your business and transfer a regular amount of money into it from every payment you receive, which will enable you to meet your business tax requirements.

Keep cutting costs

There’s no such thing as being too tight-fisted when it comes to business costs! One of the keys to business success is to keep a close eye on all expenses and keep any unnecessary outgoings in check. All businesses attract both fixed and variable costs. Fixed costs cannot really be saved as they have to be met regardless of how well your business is doing, but there is more room for cutting variable costs. One example is your software budget. Instead of using branded software, you could switch to cloud-based, open-sourced software. You could also look into conference calls as an alternative to business travel. Variable costs are like weeds in your lawn and if you let them grow, then your business will suffer.  

Look into cloud-based accountancy

Many businesses prefer to use regular accounting software when it comes to managing their finances, but this is usually more expensive and less flexible than cloud-based software. When you transfer your accountancy services to the cloud, you will be able to benefit from real-time analysis and business insights while being able to access data from any location. Cloud accountancy software will enable you to cut costs and manage your finances effectively.

Monitor financial performance

Since money is the lifeblood of your business, you can’t afford to be uninformed. It is vital that as the owner of your business, you know where all of your money is at any time. Make it a habit to regularly check out the financial performance of your business and compare it to past performances. This will help you to see your overall progress and will empower you to make projections about future revenues and expenses and to make better plans.

Call in the professionals

Entrepreneurs need to be self-reliant, but no one can succeed entirely on their own and from time to time, you can benefit from outside advice from an expert. When it comes to your finances, it can be a good idea to consult a financial advisor on occasion. They can help with your financial analysis, and their expertise will enable you not only to maximize your business profits but also to develop your own financial management skills.

Conclusion

There are few ventures more demanding or rewarding than running your own business, but it is easy to get side-tracked in this high-pressure, busy role. Make sure that you don’t lose sight of the basics, and work hard to perfect your money management skills as this is the best way to reach your business goals and make your organization profitable.

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