Is your business facing difficulties in paying day-to-day expenses? Has financial management been drowning you? If yes, then you are reading the right article on Finance Management. Managing your finances effectively is crucial for the success of any business. For a small business, it is even more important since 82% of small businesses fail due to poor financial management.
Make Finance Management Easy
While we’re on the subject of financial management, it is a well-known fact that Covid-19 has led the world to a financial crisis. In such times, it is important to make use of new practices such as E-banking that have made it easy to access different accounts and make payments electronically without any hassle. Technologies and innovations like this help make financial management much easier.
Top 10 Ideas to Make Finance Management Easy
Here are 10 ideas to help you get a hold of your finances.
Use An Accounting Software
The finance sector is changing, and these changes have led to the automation of financial operations. Nowadays, accounting software has become a necessity for any business. It helps in recording transactions more effectively while reducing the chances of errors. Furthermore, it is easier to keep track of your financial activity if you use this accounting software as financial records are kept up to date. Here’s a tip: you can find accounting software at Digital Supermarket. Using such software for your business activities sets a solid foundation for effective financial management.
Update Your Business Plan
A business plan is not just a document containing business objectives and goals. Drawing up a business plan and keeping it up to date is extremely important as it helps you meet your goals efficiently. In addition to that, having an updated business plan helps manage business finance without any room for flaws and also aids in obtaining financial help. For instance, microfinance banks have become increasingly popular, and they help secure loans for small businesses at reasonable interest rates. Having a business plan also advocates your business as credible and smart.
Prepare A Cash Flow Forecast
A cash flow forecast will give you a summary of all your predicted cash outflows and inflows on a month-by-month basis. It also gives the expected cash balance at the end of each month. A negative balance will help you be prepared in advance while also being able to trace the reason for it. For example, if your cash flow forecast shows a large payment being made to your supplier while your customers are delaying payment, you will know the reason for your cash shortage, and you can then address this problem accordingly.
Avoid Holding Inventory
Excess inventory takes up a lot of space in warehouses, thereby incurring rent and insurance costs. The metaphor, “don’t put all your eggs in one basket,” still rings true today. Therefore, you should reduce your inventory level, and the money saved can be kept in a bank to earn interest. Either this or you can invest it in the stock market to diversify your activities. If your business designs specialized products for each customer, then keeping an inventory of raw materials is of no use. You can instead save time by ordering raw materials just when you need them and saving costs to improve the flow of your finances.
Many profitable businesses have failed because they have made the mistake of confusing cash with profit. Your business can be earning a profit and still have no cash saved if the majority of the sales are on credit. Hence, it is extremely important to make sure that your receivables are paying you on time, and if this is not the case, you can offer cash discounts to encourage them to pay quickly. Alternatively, you can factor in your debts by selling your receivables to a third party in exchange for cash. This measure also avoids your business facing bad debts, a situation where your receivable is unable to pay the amount owed as the responsibility of collecting the debt is no longer yours.
Overheads make up a major chunk of your cash outflows. Therefore, by reducing them, you will be regulating your finances. If your business is not operating efficiently, the first step is to employ techniques that will also help you in saving money. For example, if you are an office-based business, you can ensure that monitors, air conditioners, lights are switched off during breaks which will reduce your electricity bill too. Also, this way, your business will gain a good ethical reputation as your techniques will be environmentally friendly. Having a good brand image is extremely important, especially for small businesses as competition increases due to E-commerce.
Set Financial Goals
Do you have any objectives in mind for your business? If yes, then it is time for you to draft them on paper so you can set financial goals accordingly. Setting financial goals is the most effective strategy to manage your finances. You can also share your financial goals with your workers for future, who will know what they have to work towards to help the business achieve its goals. It will also give them a sense of unity, motivating them to work hard.
Plan For Larger Expenses which is a big part of Finance Management
You cannot prepare for all expenses in advance, but for some, you can. Let’s imagine that the industry in which your business is located is going through some major technological changes. Then, you will have to update your equipment and software to remain competitive. To deal with this situation, you can set up a savings account and set a target for each month and it is a damn important part of finance management.
Meet Tax Deadlines
Failure to meet tax deadlines leads to penalties in the form of fines and interests. These are extra expenses that can easily be avoided by keeping your accounts up to date and staying organized. Employing these measures will ensure that you only pay the amount you are entitled to pay without any extra charges.
Your cash flow is the lifeblood of your business and makes Finance Management easy. To ensure your survival in the industry, you have to manage your finances efficiently. Only then will you be able to be profitable in the long run. All these ideas will ensure your finances are managed appropriately.
Hire Financial Advisor
If you are not familiar with finance management software then you can hire a financial advisor as well because they can do wonders for your finance management easily.