Financial management is the procedure of keeping track of your business money by means of planning, setting targets, budgeting, tracking income and expenses, and making investments. As a small business owner you must be mindful of the fact that in order to run your business operations smoothly, you need sufficient finances to cover the expenses. A comprehensive financial management plan helps you dodge unfavorable cash flow periods and put your business on the right track to gain profits. On the other hand, failing to manage your finances wisely can result in issues like getting short of money, mishandling of accounts receivable along with late payments etc.
So, here the top 5 tips that can help you manage your small business finances effectually:
When your finances are not managed, you are likely to miss deadlines of your due bills like credit cards, business loans and accounts payable. This further bogs you down with additional interest and late penalties, unpleasant relationship with your vendors and lenders plus weakening position in the market. Thus, to stay away from missing due bills, try to manage your deadlines. The best way todo this is by keeping a record of your due payments and setting alerts on your phone. You can also manage your payment schedules on your computer calendar.
How much did you spend last week or last month or even yesterday? If you can’t answer this you’re probably not watching your spending carefully and this will lead to bills accumulation plus over spending and mismanagement of funds. Majority of small business owners have different accounts like savings, checking, and credit card. It is very important to identify how much you’re withdrawing from each account to record your spending. The best way to do this is by managing your ledgers through an accounting software. An accounting software will help you monitor your transactions, spending as well as your cash in hand.
Having your separate business bank account is crucial for managing your finances adeptly because a single account for both personal and business use can result in jumbled records and excessive spending. Also, it becomes extremely troublesome to keep track of your outgoing and incoming cash. Therefore, the best way to do this is by maintaining entirely separate accounts for your business and personal use. This will help you record your spending, check profitability and set your ledgers efficiently.
Are you mostly short of goods or do you have excess inventory resting in the store for years? In both cases, you’re not managing your inventory aptly. Managing small business finances is very much dependent on the way you manage your inventory. The best way to manage it is by recording inventory sales and purchases or using an accounting software to monitor what to order and when.
Emergency expenses can occur anytime. Thus, for financial peace of mind, it is substantial to keep a cash reserve for covering emergency expenses. The best way to do is by opening a saving account for your business and regularly depositing money into your reserve. This will save you going indebt and covering unexpected expenses without disturbing the normal cash flow of your business.
These tips are useful for managing your small business finances effectively. However, if you wish to make things further easier, choose an accounting software like LedgerMax that provides you a very easy and low-priced way to monitor your finances.