One of the most important golden rules to implement when you run a business is to keep your finances in check. Most businesses that fail do so because they run out of cash or get into debt. In this guide, we’ll explore some steps you can take to manage your money effectively. Once you have top finance skills paired with these tips you will be on your way to being a finance whizz!
Setting deadlines
Setting deadlines is hugely beneficial for business owners because it enables them to plan ahead and ensure a steady, stable flow of cash. If you send out invoices to clients and they don’t get paid for weeks or months, there is a risk of cash flow issues and you may find that you are unable to cover expenses and outgoings because you’re waiting on payments. Establish firm deadlines from the outset, make the payment date clear when you communicate with clients and offer services and issue a reminder as the date draws near. Follow up unpaid invoices and make sure you have plans in place to recover funds if clients are unable to pay or they refuse to respond to calls or mail.
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Using budgets
Budgeting is one of the most effective techniques for managing funds and regulating spending. Every business owner should work to a budget, which covers income, regular expenses and one-off outgoings in the month or quarter ahead. With an accurate budget, you can plan how to spend your money, set spending limits and reduce the risk of getting into debt or falling behind with payments. Use your budget to see how much you can afford to spend or reinvest in the company and try to set aside funds for emergencies or unexpected disruptions or setbacks. Running a business can be unpredictable, and managers and directors may have to contend with obstacles or incidents that require an injection of cash or funds to bridge a gap caused by a fall in sales or downtime, for example.
If you are new to budgeting, you can find advice online and it’s also possible to take advantage of apps and online tools that provide templates and tips to help make budgeting for business simple and stress-free.
Forecasting
When you own a company, it’s always beneficial to think about the future and try to plan ahead as best you can. Forecasting is a means of looking ahead and analyzing figures to help you regulate spending and predict profits and losses. If you’re not experienced in accounting, and you haven’t used forecasting before, you can use software and apps or seek expert advice from an accountant. Effective forecasting can help you draw up tailored strategies for your business based on data and trends, which can help you to expand, grow and iron out potential issues.
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Checking balances and auditing statements
Many business owners are incredibly diligent when it comes to checking balances and going through statements, but some don’t know what is going on with their accounts. If you tend to go for weeks without looking at your bank balance, or you don’t know exactly how much money you have in your accounts, now is the time to maintain a firmer grip on your finances. Check your accounts frequently, keep an eye on balances and transactions and analyze your payments to make sure that you know where your money goes. Highlight areas where you are overspending and try to reduce expenses where possible if you are trying to save or increase profit margins. If you are on the ball and you keep a handle on your books, you should be able to cut out unnecessary costs and spot early warning signs of cash flow issues or falling sales.
Understanding tax
Paying tax is different when you own a company. Rather than paying through your wages as employees do, you will be expected to pay business taxes. Tax can be complex if you haven’t managed a company before, but there are ways to simplify the process and find answers to questions like what is a TIN number, how much tax do I need to pay and what kinds of expenses are tax-deductible? If you have any queries about paying tax, it is always beneficial to search online using reputable sources and government websites and to seek advice from accounting firms or freelancers who have experience in working with businesses. Experts can help you complete your tax return accurately, ensure that you pay your tax bill on time and make sure that you benefit from tax relief and deductions for expenses. Hiring an accountant can also free up time and eliminate stress when the deadline is looming.
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Managing expenses
It is natural to think about boosting profits by supercharging sales, but bringing more money into the business is not the only way to enhance margins. It is also beneficial to monitor and manage spending. If your expenses are too high, your profits will suffer even if you’re attracting more customers and sales are increasing. Look for ways to improve efficiency and lower your outgoings. Investing in technology, capping employee expenses and looking into flexible staffing models are examples of steps that could help you reduce expenses without compromising on quality or customer service. Use your budget to pinpoint areas where spending is excessive and set limits. You could save a substantial amount of money on wages if you offer short-term contracts for a seasonal business rather than hiring permanent members of staff and swapping business trips for video conferences, for example.
Outsourcing
Keeping a business afloat involves tackling multiple tasks, and often, employers cannot afford to hire employees who have all the skills necessary to achieve key objectives. Outsourcing offers an alternative to hiring new employees, providing access to skills that you may not have in-house. With outsourcing, you can pay a fee in exchange for services, which optimize operations and free up time for your core team to concentrate on the tasks that are essential for the daily running of the business. Consider a medical practice. The primary aim is to provide clients and patients with effective treatments and therapies. If you outsource IT support, cleaning and waste disposal and digital marketing, you can provide an excellent service for clients, ensure you are fully compliant, protect against disruptions and technical issues and generate leads while focusing on patient care.
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Balancing the books is one of the most challenging aspects of running any kind of business. If you own a company, and you’re looking for simple ways to increase profits and avoid debts and cash flow issues, take these tips on board today.