By Henry Brown
For every firm, knowing how much you should spend and how much you should be paid is essential. If you do not keep a tight eye on your working capital, you could wind up with large debts, which can be terrible for both your business and your personal life. Here are a few tips to help you remain on top of your company’s finances and avoid financial trouble.
Supply chain management should be outsourced.
If you have a large vendor network, you may find that paying each one separately consumes a significant amount of your time and makes it very easy to neglect one. To simplify the process, consider employing a supply chain management business to gather all your bills and submit them to you as one invoice.
You can then reimburse this invoice, and the supply chain management business will transfer the funds on your behalf to all your suppliers, saving you a significant amount of time and work.
Set up reminders for both expected and incoming payments.
It is critical to ensure that your customers pay you on time. If clients pay you monthly or annually, ensure that their money is sent into your account on a regular basis so you can follow up with late payers. When cashing in checks, schedule a reminder for a few days later to ensure that it has not bounced.
You do not want to end up in debt because of being too lax when it comes to chasing down payments. Make sure that if consumers pay their invoices late, you charge reasonable late fees to cover any additional costs that may arise. You should also consider using direct debit software to make payments easier for both your clients and you.
Make certain that everyone understands their roles.
Ascertain that everyone is aware of their financial responsibilities. Who is responsible for keeping track of expenses? Do you complete them individually and then combine them at the end of the month, or do you keep track of them as you go? Who is in charge of keeping track of invoices, preparing tax returns, and filing accounts? If you have many teams, who receives a budget and who guarantees it is followed? In small businesses where workers routinely cover many responsibilities, knowing who is responsible for what is crucial.
Invoices and bill payments could be automated.
Instead of manually completing each bill and invoice, software can be used to generate them automatically. This can save you a lot of time while also lowering billing or invoicing errors. You should also automate any recurring payments to vendors, such as through a standing order or direct debit.
Keep your business and personal funds separate.
It is too simple to have all your business and personal earnings flowing into and out of the same account, especially if you own a small business. It may be easier, but it is also the quickest way to muddle your money and miss any cash flow concerns before they become a major problem. By keeping them separate and paying yourself a wage from there, you can keep a closer check on things and make tax returns and bookkeeping much easier, especially if you are audited at any point.
Make sure you have enough money.
Many small firms may not have enough capital to get through the startup phase. To avoid this, save at least six months’ worth of living expenses and the amount you anticipate needing for the first six months of company expenses. Prepare as though you will not receive any business revenue at all; many new and budding enterprises may find this to be the case.
Seek financial assistance before it is too late.
A common mistake is to wait until your company is in financial trouble before applying for business loans or other forms of credit. This is precisely the time when you are least likely to receive financial assistance. While your funds are still in good shape, consider applying for a company loan. The loan might be used for expansion or as an emergency credit facility rather than for rescue.
Make sure you understand your worth.
If you are new to running a small business and the complexity of small business finance, you may try to build a reputation for yourself by undercutting the pricing of your competitors. Promotional deals are an excellent way to make a good initial impression, but being the lowest priced alternative may result in long-term financial issues.
While you build your market presence, cheap prices imply a low turnover. Profit margins might be razor thin as a result, and cash flow can be problematic. If you currently work in a generally low-margin profession, such as hospitality, a few unanticipated costs can mark the death of your business.
Accounting and bookkeeping should be outsourced.
This may cost you money, which may appear counter-productive, but if you outsource bookkeeping services, you will save yourself a lot of time and irritation while also ensuring that your finances are in order and everything is above board and legal. Ensure your accountant is familiar with your industry and has the relevant qualifications and accreditation.
If you cannot afford the services of a professional accountant or bookkeeper, you should appreciate the value of allocating time to conduct your own bookkeeping, which, while not the most exciting aspect of running your own business, is crucial.
Bookkeeping that is organized and efficient allows you to stay on top of your company’s financial status and evaluate where and how you may cut costs and spend to make your business more successful and fruitful.
By following the procedures outlined above, you will be able to stay on top of your company’s finances and make the process of dealing with money flowing in and out of your organization much more seamless and streamlined.
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Henry Brown is an online marketing executive. When he isn’t talking shop, he’s roaming the streets of London, uncovering the extra-ordinary in the ordinary.
