Good financial management is the core of a successful business. You need to be able to marshal your financial resources to work for you and the good news is that you can take a few small steps to improve your financial management.
Have A Business Plan
This doesn’t mean put together one of those business plans to show the bank manager to get a business loans and then leave it in a drawer forever more. It means have a clear step-by-step plan for your business for the next few years with numbers included so you know what money you’re going to need and where it will come from.
Don’t Shy Away From Financing When You Need It
Debt is not something to undertake lightly but it’s also not something to avoid entirely. Loans allow you to access capital now and pay for it later – if this allows your business to grow then it can be the ideal move. You may also find that a short-term loan may often solve a short-term cashflow problem too.
Maintain A Good Credit Record
Pay back your loans, don’t maintain large balances on the company cards, pay suppliers by the due date, etc. you’ll find loans are easier to get and cheaper if you’ve got a good credit record.
Always Know Your Financial Position
You want to keep on top of your profit and loss, your balance sheet and know, at least once a day, how much money you have on hand, what kind of sales you’re making and your current inventory. You should also compare this to the targets that you set in your business plan.
Look To Get Your Invoices Paid On Time
A sale isn’t a sale if you don’t have the money for it. One of the easiest ways for a small business to flounder is to get caught providing credit to customers who don’t pay on time. Have clear credit terms and don’t be afraid to call a client about settling a late invoice.
Understand Your Cashflow
Cashflow is a measure of money in and money out at any given point in your business’s life. You need your cashflow to stay positive if you want to stay in business. Make sure you know the day-to-day running costs of your business and that there’s enough money on hand to meet these obligations.
Make Tax Payments Easy On You
If you find it hard to save for quarterly tax payments, set aside the money monthly or fortnightly, instead. While this isn’t always a perfect resolution – it has the advantage of making it easy to budget for your tax.
Always Meet Tax Deadlines
It’s bad enough having to pay taxes, you don’t want to have to pay fines or interest on those taxes too. The more you focus on meeting your tax deadlines, the less likely you are to be throwing money away.
Manage Your Inventory
Efficient inventory management ensures that you have enough supplies on hand to meet customer demand but not so much on hand that you’re tying up your money unnecessarily. A solid stock control system can help ensure that you never run out but you’re not piling up inventory you don’t need.
Always Tackle Financial Problems Head On When They Arise
It may be tempting to act like an ostrich and bury your head in the sand but you are much better off dealing with financial problems when they arise (and thus are relatively easy to manage) than letting them build up and become serious problems.
Final Thoughts On Financial Management
You don’t need to be an accountant to know the importance of financial management or to be good at it.
Better financial management comes from focusing on finances and taking steps to ensure that your money works for you as much as you work for your money.
