When running a small business, most people focus too much on the issue of making a profit, which makes them develop a particular kind of tunnel-vision. In this state, they just think about earning money, which sometimes makes them forget about what they should do with it once they finally have it.
The only thing that can enable a company of any size a fighting chance is a well-organized financial life. Here are few tips that can help get you a bit closer to this goal.
Make an Assessment of Your Finances
Admitting that you have a financial problem is not an easy thing and can sometimes result in a serious case of defeatism. However, a fiscally responsible business owner cannot afford to run away from an ugly truth. What you need to do is make a general overview of all your assets and liabilities, which will allow you to create a balance sheet.
This will show you exactly where you stand at and give you a more or less accurate image of your overall net worth. No matter what the results show there is no room for panic since there is always a way to make things better. A negative net worth can easily become a positive one with a good financial management and a positive one can become even better.
Draw Up a Budget on a Monthly Basis
The most transparent difference between responsible and irresponsible business owners is in the frequency with which they draw up their budget. To some, this is an inconvenient chore that should be done once or twice a year. On the other hand, for others this is something that should be done at least once a month. All you need to do is make a short list of incomes and expenses. This is a great way to see if there is something not working as it is supposed to.
Look for Professional Aid
One of the greatest myths in the business world is that professional accountants are meant just for millionaires and major conglomerates. No matter how long you are in the business, your finances may need a bit more professional approach.
The truth is that financial services of most accounting companies depend on your particular needs. Therefore, your price range can be determined by the spectrum of services you expect to receive. In other words, you get exactly what you pay for.
Get Adequate Software
Even if you decide to manage your finances on your own, in the 21st century there are a lot of types of accounting software that may help you out in these efforts. Through them you can access customer and vendor information, monitor your bank accounts and even oversee your supply chain processes. Overall, they speed up the entire process, improve accuracy by minimizing the margin of error.
Furthermore, for all those running international businesses they also make dealing with multiple currencies much easier.
Maintain a Cash Flow
The fact that you have a lot of work, doesn’t mean that you won’t face a financial halt sooner or later. You see, a lot of people go with the credit payment so instead of getting all your money instantly, you receive your payments slowly over the course of time. This can sometimes make you run out of resources to cover your basic operational costs.
When this happens, you can either apply for a new loan, borrow money from a third party or sell your account receivables to a factoring company. In case where you have a non-conscientious debtor, it might even be worth your while to contact a debt collecting agency.
Pay Everything on Time
A lot of SMBs whine about their clients not paying in time while they fail to honor their creditors in the same manner. In order to be considered a reliable partner and in time become a respectable business, you need to always meet the deadlines of your payments. The easiest way to do so is to pay your bills the same day you receive them.
Furthermore, if there are some bills that always arrive on the same date, you can even schedule this payment in Google Calendar or similar digital tool. One of the greatest benefits that can come out of this is a massive boost to your credit rating.
Finally, you need to start saving so that you can be prepared for any situation. Saving gradually can be quite easy on your budget even if at the time it seems quite strained. Just set aside an amount of your profits each month and deposit it into a special savings account so you can use it when you need it the most.
The more money you have in this account, the less likely it is that you will be forced to look for a loan.
It is impossible to run an efficient business without managing your finances properly. Even great productivity, a loyal client base and great sales cannot make up for a poor financial management. From this, it is easy to conclude that well organized financial life is a cornerstone of every business success.