How To Manage Your Business Finances?
by Arnab Dey Finance Published on: 09 May 2022 Last Updated on: 08 November 2024
Running a successful business takes a lot more than offering amazing goods or services. This is no doubt an important part of success in your business venture but you equally need to understand that other things are involved as well.
Way up on the list of other important things is financial intelligence. Sadly, quite a lot of ventures do not make it far because they are lacking in it or even refused to take it seriously.
You are therefore advised to avoid making the same mistake. This is so that you would see your venture grow in leaps and bounds beyond even mere survival. On this note, practical understanding of some things is of the essence.
Some Of These Essential Things That Need To Be Known Include:
- Risk management
- Taxes
- Budgeting
- Liquidity management
- Large purchase financing
- Communication
- Record keeping
- Retirement planning and wealth transfer
All of these and more make up key components of financial planning and business owners are especially advised to know about them by heart. The truth is that there are professional services that specialize in the business of ensuring these areas are well taken care of.
However, small businesses do not often have the luxury of engaging their services. This is clearly because they do not have the financial means to engage them given their little revenue versus enormous expenses.
As a result, their owners and key players must understand these aspects of financial planning. All of these are aimed at ensuring the business’s finances are properly managed.
Fortunately, more on this subject will be discussed here in this article and businesses stand to gain a lot by putting the details shared here to good use. So, they are advised to keep reading.
Post Pandemic Reality – Many Businesses Were Dealt Severe Financial Blows
Stakeholders concerned about the financial state of businesses around the world are faced with many sad realities. This is considering how so many of these businesses are struggling tooth and nail to stay afloat.
Many have already been submerged and this begs the question of why this is the case. Well, there are several reasonable explanations for this. One of the common explanations you are likely to get currently is the adverse effect of the Covid-19 pandemic.
Frankly speaking, many of them have a point in bringing this up. This is because the harsh realities of the pandemic hit so hard on their ability to generate revenue and operate effectively.
In some parts of the world, the only reason some are still in operation is because of the stimulus handed over to them by the government. But the truth is that these businesses would need a lot more than the incentives that they have gotten.
Corporate Financial Intelligence Is More Important than Ever Before:
Seeing the sad financial realities that many businesses are now facing in the aftermath of the pandemic, one thing is certain. It is that financial planning has never been this important.
This is a time in the corporate sphere where decisions simply cannot be made out of a hunch. Business owners and major stakeholders need to be calculative, especially in the area of finances.
This also explains why resources such as this one detailing how to manage a business’s finances should be taken seriously.
Some Of The Reasons For This Include The Following:
1. Employment Rates will be Boosted
Any sane and serious-minded society understands that the private sector is vital in boosting the employment rate. The inability of a business to properly manage its finances will affect its ability to hire more hands.
It might not be news to you that staff strength is likely going to be compromised the moment a business’s finances are threatened. This simply means that there is the likelihood that some workers will be laid off and this will increase the number of unemployed people.
So in the spirit of ensuring that more people have something reasonable to do, businesses are strongly encouraged to put their finances in order. The importance of doing this simply cannot be overemphasized especially in light of this point.
2. Helps with Expansion
Almost every business owner and major stakeholders have expansion goals. If for no other reason, this is so that the revenue generated will see a significant increase eventually.
Sadly, many of these owners and their stakeholders are unable to see this dream come to fruition. In almost all cases, this is because the financial means to engineer this expansion goal is lacking.
This is just one of the many ways that a business’s lack of financial resources can keep it undesirably stuck at a point. Proper management of the venture’s finances will increase the chances of having the means to fuel expansion goals. However, that will take a lot of time. By having proper business funding in return for the upcoming invoices, you will transform your expansion goal into reality soon.
4. Consideration by Financial Institutions
Some people keep wondering if a business taking out a loan is a good idea. Well, this depends on the intent of the loan. If the loan is for expansion and there are significant feasible signs that it would pay off, this is a good idea.
For the record, taking out loans from financial institutions has turned out to be a positive game-changer for many ventures out there. For example, some businesses are unable to meet demand simply because they lack certain pieces of equipment to scale up production.
As far as the supply is definite, taking out a loan to get these pieces of equipment seems like the wise thing to do. This is just a clear example of how loans can help out.
Having established that a loan can be such a good thing, financial institutions/lenders are not just going to hand the funds over without some digging into your business. For one, they need to be very sure that you can fulfill your obligation as a borrower when the time comes.
To make sure of this, they go over your business’s financial records. The essence is to be certain that prudence is not lacking in how things have unfolded.
And just in case you care to know, these institutions/lenders have an eagle eye for spotting financial inconsistencies. So, you should ensure that things are in order in this regard.
Tips on How to Properly Manage a Your Business Finances
We have gone on and on about the importance of proper management of a business’s finances above. We can only hope that you properly digested the details and see reasons to take good care of your business finances. In light of this, listed and explained below are some tips to ensure the proper management of your business finances:
1. It Starts with Record Keeping
There is such a thing as a blueprint. In this context, it refers to that point where logical plans are made to address issues. This is the simplest way we can explain it and you should know that your book of financial records is your blueprint.
It is your kick-off point on your business’s journey to proper business finance management. The good thing about having a good financial record-keeping habit is that the state of your business is properly projected through it.
This would therefore enable you to make financial decisions at the right time. This is crucial as it is possible to make the right moves at the wrong time; the consequence will likely turn out bad because of the wrong timing.
This is even though the intention is good. Well, you can only tell that it is the wrong timing if financial records are properly kept. For example, business expansion is good but it can cripple the business operations if done at the wrong time.
Unfortunately, there are businesses out there that do not do a good job keeping financial records. All that they have is what will enable them to pay the due taxes. You need to do way more than this to properly manage your business finances.
2. Be Professional Even with Family, Friends, and Loved Ones
Unfortunately, this point explains one of the minor yet serious problems affecting (especially) some small businesses. Some owners have even identified that addressing it is important but they keep sweeping the problem under the carpet. Well, you have to address this head-on.
Family, friends, and loved ones may use services or goods without paying for them. As much as you can, you need to make it clear that you run a business and it needs to be treated as such.
This might not be as easy as it sounds considering how sensitive the subject of family, friends, and loved ones are. However, it is for the good of the business which should matter to them. So, you need to address this.
For some, it is inappropriately spending the business’s money on family, friends, and loved ones. This cannot happen if the business is not up and running. So, everyone needs to help your business grow by helping you operate as professionally as you can.
3. Consider Taking Loans for the Right Reasons
Some owners are too scared to take out loans. This is understandable considering things such as interest rates and all. However, there is (more often than not) little you can do to grow all on your own.
This is why you need to seriously consider taking out a loan(s). Be that as it may, you need to do your extensive feasibility studies and ensure a loan is worth it.
You should also make sure to get the loan from the right lending service. You might want to make use of the services of a reputable loan brokering company for this purpose.
Related Resource: 4 Advantages of Small Business Loans You Might Not Know About
4. Take a Leap into the Future
This point is way more than just addressing the management of your business finances. It is also about ensuring the success of your business in the long run.
While considering ways to invest in your company’s growth, think long and hard about the future of your industry. You would be surprised to know that there are things that are relatively new (as things are) but that will become the order of the day in the nearest future.
You might want to look into investing in them as they would help your business grow exponentially. As someone that has an understanding of your industry, you just have to leap into the future of that industry.
5. Pay Attention to Tax Payment
Payment of taxes is not just a civic responsibility for individuals but companies as well. As one, you are obliged to make tax payments and you need to pay attention to this.
You are advised to consider tax payment solutions that are best for your company. For example, some companies have figured out that quarterly payment is nerve –wrecking for them. For them, the solutions lie in spreading out the payment.
By doing this, they can approach this civic duty as part of their monthly expenditure. This way, it would not be as daunting as it used to be.
6. Work on Your Billing Strategy
A lot of people think that a business’s financial troubles emanate from the inability to make sales. Well, it could be but this is not always the case.
One of the problems could be making enough sales but not being able to get clients to pay up on time. This eventually means that the company will be battling cash flow problems.
As a solution, you should revisit your billing strategy. For instance, you can decide to have payments come in bits after the commencement of phases of the project. You could do this if it works for you. Another tactic that has been proven to work is introducing small discounts on the terms that payment is made on time.
Wrap Up
Proper management of a business’s finances is one of the keys to running a successful business as mentioned above. We have touched on how this is the case here in this article and for more on this, you can click here.
We also went on to further share helpful tips on how to properly manage a company’s finances. These tips happen to be tested and trusted and so you are advised to put them to good use for the sake of growing your business.
Read Also:
Related
