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Whether you are starting your own business or have been in operation for several years, good money management is essential if you want to succeed. Despite this, it's estimated that 82% of businesses do not have good money-management plans in place - which can result in a range of different troubles further down the line. In fact, failure to properly manage your finances and cash flow will likely result in company closure - no matter how promising your initial business model may seem.
With that in mind, here are some top tips that you can use to improve your business finances and cash flow.
Use software to your advantage. One of the hardest tasks associated with a healthy cash flow is keeping track of payments, invoices, and receipts. In fact, this is an area of financial management where mistakes are made frequently - but it does not have to be this way. For example, you could use payment optimization software to automate these payments, making it much easier for you to keep on top of your invoices. This software can also save you a great deal of money as it will give you a chance to capitalize on your savings and increase your ROI. Using the right software is also a great way to improve your business efficiency.
Keep your debts in check. From time to time, you may encounter debts when it comes to running your business, especially during tough economic times. For example, you may have taken out a small loan to kickstart your company. However, managing small business debt is essential if you want to give your business longevity and ensure that your finances are in check. As a result, you should keep strict records of any outstanding debts and create an effective (yet manageable) repayment plan.
Reach out to investors. While a lot of the funds you funnel into your business will come from your own pocket, this does not always have to be the case. For example, by learning how to approach investors and win them over, you’ll be able to secure funding that takes your business to new heights. For example, this could help you turn from a business that operates solely online to one with a physical store or office space.
Make it easy for your customers to pay you. One of the easiest ways to improve your cash flow is by ensuring it's easy for your customers to pay you. For example, you should provide them with plenty of payment methods to choose one that suits their needs best. For example, you may want to accept online payments through sites such as paypal, in addition to more traditional methods such as cash and card. Diversifying payment options is also a great way to make running your small business easier.
Keep thorough financial records. This step is perhaps the most important in ensuring that your business remains financially healthy, as your records can be used to identify any financial mistakes you may be making before it is too late for you to rectify them. Additionally, keeping thorough records is essential for tax planning and can be used to back up your claims when approaching investors, as you’ll have quantifiable evidence to back up your claims that your business is worth the investment. Again, there is plenty of free software you can use to manage your finances and keep thorough records - which means you simply need to input the data. However, you should ensure that you keep multiple different copies of your records in case the worst happens (and you accidentally delete/lose everything).
Hire an accountant. If maths wasn’t your best subject at school, or you find money management and budgeting difficult, then the best thing you can do for your business is bring in an accountant. This does not always mean hiring a new member of staff, as accounts can also be outsourced. Either way, an accountant can help you stay on track and help you put plans in place to secure a better financial future for your brand. Additionally, they’ll be able to identify mistakes you are making and stop them in their tracks. This can save you thousands upon thousands of pounds, giving your business the long life it deserves. To put it simply, an accountant is an invaluable asset to any business.
Have a separate bank account for your business. While this step may seem like an obvious maneuver, you’d be surprised that many small businesses owners do not set up a separate bank account for their business. However, this makes it near impossible to distinguish their personal funds from their business ones, which can only lead to trouble further down the line. As such, you should set up a separate bank account for your business sooner rather than later.
The business + burnout workplace culture advisors at Breakfast Leadership aim to prevent employee burnout while addressing your business’s needs and concerns. Call (619) 751-0677 to learn more about how we can help!