Money is king! And it is a crucial factor when it comes to the financial management of any company. Whether you have a successful company or you are struggling as a business, it is essential to manage your cash flow, and for many people, it is vital to business survival. Statistics have shown that more than 60 per cent of companies that make a profit still run out of money.
That is where money management comes in. But what is money management? Money management can be described as the process of managing the finances of your business via setting goals, creating budgets, monitoring expenses and income, as well as investing.
Money management can help you avoid negative cash flow and make sure your business operates smoothly. If you do not manage your money wisely, it can lead to issues such as running out of working capital, making late payments, and not receiving on accounts receivable.
1. Do Not Mix Personal and Business Expenses
There are uncountable reasons not to mix personal and business expenses, including personal liability, tax problems, and fumbled accounting records and so much more. If things go wrong, try as much as you can to secure your business money with personal because it will bring a lot of problems, which you must deal with later.
To separate personal and business expenses, create a business budget and own budget. Follow them carefully and separately that your loans and credit cards do not get used for your business finances.
2. Save as Much as You Can
Once you have created your budget, one area of great importance is to save. There are numerous ways you can save money for your business, such as cutting on expenses.
Remember it is not about keeping away all the profits accrued from your business, but rather being smart with your investment. Instead of using your saved money on a used car or furniture, you can invest it in other important aspects of your business.
You can also save money by cutting some utility expenses. Let your energy firm audit your office premises for energy efficiency.
3. Track Your Spending
Have you calculated the amount you stash out per day, week, or month? You have to track your expenditure; you could end up having bills that you do not require. If you do not monitor your spending, you could misuse or overspend your money. In such a case where there are unpredictable cash flow cycles, you must try selective invoice finance to have a great arrangement for emergency situations.
Most companies have multiple accounts such as savings account, checking accounts, and credit card account. Ensure that you know how much you are spending or withdrawing from all your accounts.
Using a debit card or a credit card is easy to cover small expenses such as getting a new coffee machine, a little lunch for your employees, and so on. Low costs are what add up and increase your overall bills. If you do not track your spending, you could end up having a pile of bills.
4. Create a Budget
Many business owners, especially startups, do not have a budget as they think the whole process of creating a listing and adding numbers is tedious. However, if you are reckless with money, budgeting is a must.
If having a budget will help you spend your money wisely, then you must have a budget. Instead of that concentrating on the process itself, channel your efforts on the value that budgeting will add to your business.
5. Clear Your Bills on Time
Just like for personal finances, you should also pay all your business expenses committedly. Late payments on your business loans and credit cards can cost you a lot. Even late payments on minuscule bills such as utility bills and vendors can add up to the amount.
Create reminds to ensure you do not fail to pay any bills via cracks. If you are operating a setup, your profit-loss margins are small. Late payments could make the ma primary difference between end your financial year in the black or the red.
6. Reduce Expenditure and Increase Revenue
Two things are always straight to the point: increasing income and reducing costs, but they are difficult to achieve. If you are finding it hard to time manage your business funds, device ways to reduce expenditure and increase income
You must know how to monitor and control your company’s expenses. To reduce costs, start by analyzing your expenses. Review areas where a lot of money is spent and get rid of the frills. Also, you can reduce your spending by looking for new vendors.
To increase revenue, promote your products through social media ads, email marketing, offer discounts, create loyalty programs, introduce new products, etc.
7. Avoid New Recurring Monthly Bills
Avoid taking new loans even if you qualify for credit or have money. Most budding business people assume lenders would not give them loans or credit cards they cannot afford.
Lenders only work mostly with your reported income and the loan obligations on your credit report. So, calculate your monthly expenses and other liabilities and decide if you can manage new recurring bills, based on your income.