They say money makes the world go round. Well, they could be right considering the fact that it plays a huge role in deciding your success and social status. The modern world is all about making money, by hook or by crook.
Handling moolah, however, can get real tricky, especially with the complexities and confusions involved in dealing with it.
If you’re on your way to starting a business or have one already, you probably understand the importance of being fastidious about everything that spells money or profit.
Managing money is one of the most crucial aspects of running a business. Handling cash flow is no mean task and one wrong move can change the fate of your venture.
In order to ensure that your money is in good hands, you need to equip yourself with the fundamentals of the financial and the business world.
Mentioned ahead are a few tips that can help small business owners sort, manage as well as multiply their monies.
Your Business Structure Matters
Whether you’ve started your business as its sole proprietor or in a partnership, you need to make sure that you (and your partner) are aware of how you will plan the business structure. Once you start making profit, you will probably want to expand. But before doing so, you might want to consider incorporating your business entity as a limited liability company (LLC).
Turning your business into a legal entity will facilitate the opening of a business savings account, which will help you save money on taxes. Doing so will also protect your business from other financial risks.
Keep the Personal and the Professional Separate
Many amateur businessmen make the mistake of merging their personal and business finances. It is always advisable to keep them distinct and not use funds from one account to meet the needs or shortfalls of the other.
Having separate accounts will make it easy for you to maintain your financial records accurately by letting you track the valuation, income, expenses, tax payments, and other business/personal transactions.
Although doing so is not mandatory, it is definitely recommended.
Create and Maintain a Budget
Budgeting is one of the most important factors in managing money. You cannot allocate funds randomly to departments/divisions even though they will be spent on your own business. Doing so can spell doom.
Take the time to chalk out your weekly/monthly expenses and record the revenues earned. Match the figures and make the required amendments to the budget. Make sure, however, that you do not under-allocate funds, especially to the vital departments of your business. Furthermore, do not forget to keep some money aside for emergencies.
Keeping a watchful eye on finances never hurt anyone. Track your cash flow meticulously from the beginning in order to avoid unpleasant surprises later on. If you find that difficult to manage by yourself, you will do well in getting yourself cloud-based accounting software.
This software is smart and syncs with your system to record all the available data, which it uses to generate reports, bills, invoices, and balance sheets.
The data on the cloud can be accessed securely and easily anytime from anywhere over an Internet connection.
One more concern, in the same breath, is tracking and limiting the use of your company’s petty cash as that is money going out. Though the amounts are small, they can add up fast. Set rules and regulations about its use and designate one person who will be allowed to handle it.
Consult a Tax Advisor
Even the most successful entrepreneurs would agree that tax planning and payment can be very tricky and intimidating. It is crucial that you pay your taxes accurately and timely to avoid heavy penalties. You can engage the service of an experienced tax advisor for this.
A competent tax advisor will assist you by evaluating your tax for the current year, as well as provide you with estimates for the next year. He will also help you with the calculation of your taxes with regards to your business structure, thereby preventing an over or underpayment.
Make sure you have your financial documents in place though. Your tax advisor is going to need all the information when calculating your deductions and explaining the saving options.
Even if you have additional cash, do not succumb to the temptation of spending more than required. It is easier to spend than save, so you need to think a million times before letting money leave your hands.
By this, I do not mean you underpay your staff, or not invest in bettering your business operations. Be tight-fisted with your finances and set an example for your employees by applying the rules of austerity to yourself as well.
Until you start making profits, you will need to be very cautious with your company’s money. Do not make high-risk investments or take out very large loans. Be strict in your money-handling and you should do well in the savings department.
Focus on Your Goals
You probably started your business with certain goals in mind. Goals, however, are of two kinds – long-term and short-term. Maybe you’ve decided on a long-term goal and have developed a strategy for realizing it. You will also need to set several other goals for the foreseeable future along the way.
The reason for doing so is that breaking a larger goal down into smaller and detailed steps will enable you to know exactly what must be done to achieve it. Processes involving implementation of ideas, allocation of resources, budgetary concerns, human capital investment, and so on will become much clearer once you have a road map that guides you through your journey to success.
Forecast Your Financial Needs
Keep in mind that as a business owner all your decisions matter. They can lead your business to enormous profits or huge losses. So it makes sense to do the number-crunching beforehand and make informed decisions.
Because yours is a small business, you can keep things simple. Calculate your inventory, chart out your estimated sales, and figure out how much your can spend on production, marketing initiatives, employee salaries, etc. Once you have these projections in place, you can easily tweak your expenses to ensure a healthy inflow of cash.
Forecasting will also help you set realistic goals for the future. Anticipating your cash flow will give you a proper direction to channelize your efforts.
Manage Your Time and Space
Knowing how to manage two of your most precious resources, time and space, is an art. You cannot expect to set systems and work in an organized manner in the middle of pandemonium. An office that is unorganized will only end up increasing your workload, thereby increasing the number of hours you spend there.
Working in a neat and orderly space would mean getting rid of the unwanted junk. Doing so will enhance productivity. Get your filing systems and stationery in order so that the next time you need something, you won’t have to rummage through your drawers and shelves looking for them.
Apart from space, you also need to manage your time well. Use online time-tracking software and apps to do so. These systems will help you use your time optimally by calculating how much time was spent on which task and letting you reschedule your activities accordingly.
Managing money is not easy, and managing a business can take all that you have. You must have read a lot about planning, forecasting, budgeting, investing, and so on, but there’s so much that books don’t tell you. Experience is the greatest teacher and common sense is usually a good guide. However, our suggestions presented here are also no less reliable. Pay attention, they will also stand you in good stead.