In the world of business, the lifeline for business survival is finances. A business that fails to properly manage its finance is at the peril of winding out of business anytime soon. This therefore propounds a task that the entrepreneur should make conscious efforts to perform them diligently. Properly managing your finances tend to have a positive correlation with the success and profitability of the business at large. Below are a few tips to help you manage your finances properly:
1. AVOID EXPENSIVE CREDITS
In order to build a successful business, the first and foremost task is to set financial goals and put measures in place not to divert from these goals. You can’t totally avoid credits but make sure they are their possible minimum. Credit facilities is said to be a necessary evil. Expensive credits will only make your business face liquidity problems as well as loss of Goodwill and profits as well.
2. PLAN FOR YOUR EXPENDITURE:
At the early stages of your startup, it is a smart move to keep your fixed expenses at the lowest possible limit. Always plan in advance for expenses such as rent, payrolls, taxes, interest, utilities and other operating expenses as it can really help you reduce your financial burden. As the maxim goes,”Proper Planning Prevents Problems”. Planning ahead helps put your cash flow in a positive term even during the tightest seasons in business.
3. MAINTAIN A BORDERLINE BETWEEN PERSONAL AND BUSINESS FINANCE
Once you have successfully selected your business name and business registered properly, you need to open a commercial bank account and business bank accounts should be kept separate. Keeping a borderline between these two finances will provide a better way to properly account for the business activities for the ascertainment of tax.
Adhere to separate loans and cheques books for your business strictly and don’t use it for personal expenses and vice versa. This is very prudent, as it clearly ensures funds are not misappropriated.
4. KEEP TRACK ON YOUR MONEY MOVEMENT
No matter how small your business is, you are required to have your payment terms outlined concisely and efficiently for managing small business finances. Even though it is difficult in today’s business world, you need to take into account both financial and legal aspects of your monetary transactions and trace all the movements of capital regularly. Keep an eagle’s eye on all business transactions. Keeping track of how your company is doing will help you identify areas that are efficient and areas that are not, in order to control the funds spent on these areas. This also helps you to properly prepare budgets for the future.
5. PROPER MANAGEMENT OF DEBTORS:
Lastly, manage your debtors well. Bad debts can lock up your cash and this can be a frustrating situation to find yourself in as an entrepreneur. Inability of your debtors to pay their debts after a while can lead you to losing tons of your stock and at the same time your hard earned cash. This will impact on your liquidity as a business owner. You will be cash trapped and may not be able to meet certain financial obligations. Put in mechanisms to manage your debtors to prevent disappointments and issues of bad debts. Review the credit limits for your clients and carefully assess their financial strengths to determine how much they can actually take and pay for on time and don’t over extend credit. Do well to stick to credit payment terms and desist from supplying more goods to a customer who still owes so much from previous sales. This may cost you some few “clients” or business but will save you a great deal from the risk of bad and irrecoverable debts.
In sum, as an entrepreneur, you need to be financially disciplined and have a clear cut plan for your financial obligations and dealings at every point in time.