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Small business owners need to manage the finance of their company in a professional way. Business is about money, you made it with cash, and you are looking for gaining more money. Your investment can be made of your capital or loans and investor’s wealth.
Money buys your business assets, pays for your expenses like row materials or products for resale them, and pay the salaries to your employee and yourself.
Money flows into two directions, In and out. The ideal situation is when your business has more coming in the capital than going out. That means that you need to make money and to control how it flows.
People are mostly worried more about making money than about managing it. This situation can cause good businesses to fail even though they are having a good income from good sales. Cashflow is a severe issue that needs taking care of by the business owner or manager.
You can not let your business without enough cash for the day to day life of your business. Not having an idea of how much money you will need on any given day can make your business lose or even fail. You must have the correct vision of your finance.
If you will need extra credit and do not care about looking for it, you may have trouble paying your payroll and vendors. On the other hand, if you need to purchase some equipment that is important for the growth of your business, but you are afraid to do it because you do not have the financial report up to date, you will lose the opportunity to grow. You may lose the competition with your competitors.
You may have the best idea for a business, do you have an idea how to run the business? You may lose your company. If you do not manage correctly, it’s finance.
Entrepreneurs need to be prepared and equipped with the right tools to be able to address money management to their business to make their venture successful.
Small businesses can have the owner or owner inventors of the product they are selling. They can be MD doctors or software inventors but not finance specialist. We prepared some tips for those who have a small business and need some help with the finances.
This article can help you to learn how to manage your small business finance.
- Learn by Yourself
Before you are going to start your business, take some time to educate yourself about the aspect of finance, Learn the terms of the finance world, start from the first, and most important, the Financial statement. Reading and understanding this report will let you see into your business financial health. You will see from where your income is coming, or what part of your business is producing the money, whos hands the money crossed, and where it is at the moment of the Financial statement was published.
Financial statements have four essential reports
Your cash flow will show you how much and from where the business gets its money of money, and the amounts of money that you had to spend paying bills, salaries, and taxes.
The balance sheet will show you the business assets, liabilities, and equity of the shareholders.
The income statement will show you the total revenue per period, it can be a monthly, yearly, or at any time you need to make decisions report. Shareholder equity is the shareholder’s money that financed the company as common and preferred shares.
- Business Finances Must be separated from your personal.
A common error of beginners is to mix personal finance with business finance. Keep your business money separate from your private banking. One way to do it is by using a business credit card for your business expenses and keep all the invoices and receipts. In this way, you will have a register and control of all your transactions.
A savings account for your business will keep the money for paying taxes, emergency, or new investment.
- Keep Control On Costs
Business is about numbers says and the old cliche, you better have control over the numbers, special care on those of expenses. Do not control your expenses and affect customer satisfaction.
Expenses and costs are divided to fix cost and variable cost.
Your fixed costs are those costs that will not change according to sales, orders, and production fluctuations.
Your variable costs are those who depend on changes according to sales, orders, and production fluctuations.
One example, it can be the use of computing software and hardware. You can use open-source software like Linux Ubuntu as the operating system and Open Office as your office package for zero cost. Your equipment should not be more than your needs. If you do not make graphics with large files, you can use more economical equipment.
Use free communication tools like Skype and WhatsApp instead of costly phone calls or even more expensive trips to meet your business partners. Video conference calls will be the same as a real meeting.
- Accounting Software Can be Cloud-based
You can save time and be updated 24/7 with cloud-based accounting software. The rates per month are not that high. You can have one cloud-based accounting software of free or up to $15 per month. Read here about cloud-based accounting software.
Once you have cloud-based accounting software, you are updated reading the information or input any transaction that you made so your team will be updated no matter where they are. Sure, you will need a device that is connected to the internet.
- Monitoring and Measuring Performance
If you leave boul of candies in an open place with no cover and no restrictions, do be surprised to find it empty very soon. Could you not do it with your money? Keep control of your money and production materials.
Use your accounting to monitor what is going with your business. Get the information to keep planing the growth of your company. Keep your finger on you puls feel your business and avoid bad surprized.
You Need Professional Help
Would you give your doctor to fix the plumbing or the plumber prescribe for you? The answer is clear: each one with its expertise. You should know about the core of your business better than by an accountant or a financier know. But the accountant or financier knows better than you about accounting finance or tax. Do not hesitate to hire the right experts for what you do not know. You can save money on tax by having a good consultant. Use the proper savings account or investing in the right shares.
The success is not waiting for you to pick it up. It would be best if you work smart with your eyes on anything that is going on in your business.
Disclaimer: John Wolf and paystubmakr.com are making a total effort to offer accurate, competent, ethical HR management, employer, and workplace advice. We do not use the words of an attorney, and the content on the site is not given as legal advice. The website has readers from all US states, which all have different laws on these topics. The reader should look for legal advice before taking any action. The information presented on this website is offered as a general guide only