As a small business owner, managing business finances is one of the biggest challenges.
By adopting some proven financial management tips, you can simplify how to manage your finances and realize enhanced profitability.
This blog post explores ways to boost your financial management as a small business owner. Once you know how to manage your finances, you can assess the viability of getting business loans to grow your business.
Keep Accurate Records Of Your Income And Expenses
Many businesses fly blind by failing to keep a tab on the state of their business finances.
Benefits Of Keeping Accurate Income And Expense Records
- You have an updated position on the company’s finances
- Better business decision-making based on real-time financial data
- You can anticipate financial needs in good time and reach out to lenders for business loans.
- You can review business performance against set targets and evaluate progress.
- Your books are ready if you need to apply for credit and file taxes.
Let us look at some pointers associated with accurate record keeping;
1. Tracking Your Day-to-Day Costs
You need to maintain accurate expense records to avoid running short of cash. Cash flow issues are one of the main reasons why businesses collapse.
The money that flows into your business should be adequate to cover your day-to-day operational costs like paying for utilities, payroll, and rent.
Keep a record of expenses and ensure your business operates within its means.
2. Drawing A Budget And Following It
A budget operates like a checklist that directs how a company expends its resources.
Accurate record-keeping helps you can verify if you’re operating within budget. By complying with your budget, you avoid unnecessary debt. Moreover, you can anticipate when you’ll need to reach out to financiers for business loans to cover short-term cashflow challenges.
An effectively-drawn budget provides the roadmap to business profitability by showing available resources, estimated revenues, and projected expenses.
3. Monitoring The Financial Position Of Your Business
You need to know the financial status of your business daily; the cash at hand, the sales you’ve made, and how much stock you’ve got.
Accurate record-keeping helps you track progress against your business targets weekly or monthly.
4. Managing Your Stock
A stock management system helps you keep an accurate and real-time record of your stock levels.
Efficient stocking ensures you maintain the correct quantities of stock. If your stock levels are below optimum, you may miss out on sales opportunities and lose customers. Overstocking, on the other hand, ties up your cash unnecessarily.
Have A Plan For How You Will Reinvest Profits Back Into The Business
The goal of every business is to make a return on their investment. To realize business growth, you need a plan to inject back profit into the business.
To enhance the profitability of your business, you need to watch your overheads and improve efficiency. Optimize human resources, embrace automation, cut waste by recycling, lower power consumption, and go paperless.
Sometimes, reinvesting profits may not be adequate to hit your business growth targets if you’re making a profit lower than the amount you need to reinvest to achieve your business growth target.
In such a case, you’ll look for external funding through options like business loans, lines of credit, or invoice discounting.
Invest In Accounting Software To Help Manage Your Finances. Here’s a list of some top tools to help manage your finances:
- Accounting software: FreshBooks, Sage 50 Premium, Zoho Books
- Budgeting software: Free Agent, Xero
- Billing software: Wave Invoicing, Quickbooks Online.
- Expense tracking software: Expensify, Rydoo, SAP Concur
- Cash flow analysis tools: Invoiced, Scoro, Cash Analytics
- Business loan calculator: Camino Financial
- Inventory management software: Megaventory, Upserve
Metrics To Track Your Income And Spending Trends
If you run a small business, you can use a simple excel sheet to track your income and spending trends.
However, expense tracking software such as Expensify offers greater versatility for a growing business.
Rigorously tracking income and expenses helps you make your payments to suppliers and creditors on time. Additionally, you can effectively follow up with customers whose payments are due.
By embracing the best techniques to improve your financial management, you can keep track of your expenses, enhance efficiency, boost profitability, and achieve your business growth goals. Look at incorporating these proven financial management tips into your business to move to the next level.