Avoid That Broke Feeling: Six Ways To Manage Money In Your Business
One of the hardest things to get right as an entrepreneur is managing the financial side of your business. Over the years, I’ve spoken to many Small & Medium Business owners from around the world about how they manage their risk and improve their odds of success.
Here are six practices that consistently show up in the money management routines of successful business owners:
- Do regular cash flow forecasts
Cash flow is the oxygen your business depends on for survival. You need more money coming in than going out, and it must arrive on time for you to pay suppliers and purchase stock. The good news is taking charge of your cash flow doesn’t have to be a challenge.
One tip is to keep a cash flow forecast. This will enable you to track your finances and avoid shortfalls, stay on top of your payments, send invoices promptly, and chase those overdue bills.
Identify potential cash flow problems in advance by updating your cash flow forecasts and monitoring market conditions. Don’t forget to factor in fixed and variable costs and be realistic about your forecasts.
I often get asked if I have a forecasting template that I would recommend. I recently drew up one that is jargon free and easy to use – you don’t need an accounting degree to understand it.
You can download it here.
- Stay on good terms with creditors
Whether your business is new or expanding, you may need the occasional cash boost from a bank or lender (such as a supplier you buy from on credit) in the form of an overdraft, credit agreement or revised payments terms.
If you keep your bank and lenders updated about unforeseen outgoings or changes in forecasts, they’ll trust you more. They’ll also be more likely to treat you favorably should your business require financial assistance.
- Own your own time
You can make more money, but you can’t create more time. As the cliché goes, timeis money. The more effectively you manage your own time and maximise your use of other people’s time, the more profitable your business will be.
Carefully decide what you need to focus on personally and what you can entrust to others. Assign a value to each of your key business tasks (payroll, updating accounts, meeting with customers etc.) and track how much time you spend on each task. Then use these values to decide what to outsource, what to delegate and what to do more of.
Technology can also help. You won’t need to spend long evenings working through spreadsheets if you use the right software. An integrated cloud-based accounting solution with tools like visual reporting can also give you a consolidated view of your finances – helping you make better business decisions quickly.
- Stay on top of payments
Our research has shown that 60% of companies have to wait 60 days for invoices to be paid and nearly half (47%) say that some invoices take even 90 days. But it’s important to take charge of your debtors to ensure a healthy cash flow.
Send out invoices to customers and clients promptly, and chase overdue bills. Be clear about your payment terms; 30 days is standard. Get to know your customer payment dates and don’t ignore delays because a customer who hasn’t paid up recently might be about to go out of business.
- Tighten up your outgoings
Assess how often you pay suppliers, tax invoices, utilities and so on. Then, consider if you can pay in instalments or if you should seek more flexible payments terms. Also, review the business’s smaller expenses to ensure it adds up to what was planned for the month.
- Use technology to stay ahead of the game
Your team shouldn’t have to spend hours preparing a report to look at revenue projections. This information should be available at a glance. With software that lets your team collaborate and access real-time, accurate financial data, you’ll be able to stay on top of your cash flow and identify problems sooner.
You have your hands full with growing your business, so don’t let money management become a headache. Using an easy and affordable accounting and payroll solution will give your team the tools they need. This will let you focus on making your business successful rather than crunching numbers and doing manual paperwork.