Making sure you have money in the bank is one of the most critical parts of business. You never know what problems you’ll face in the future, so you can’t afford to not have reserves in those situations. The problem is that maintaining business finances isn’t as easy as it sounds.
When low sales and lack of cash are among the most common reasons businesses fail, you need to do everything you can to handle your company’s finances. If you need help learning how to manage your business finances, look no further. Below are seven things you can do to ensure your business has excellent finances in the future.
1. Create a Budget
Your budget is one thing you can’t afford to skip when managing your company finances. It’s too hard to make intelligent financial decisions without knowing how much income you have every month and how much you spend.
The biggest thing to focus on is your net profit every month. Tally up how much income you have and how much of it leaves your company. Your goal is to use smart spending to reduce expenditure and increase your profit.
You may not be able to remove many of your regular monthly charges, but there may be small expenses you don’t need. Those small expenses add up and can eat up a large part of your budget. Set a limit on those purchases to create a budget that works for your business.
2. Don’t Mix Personal Expenses
It’s tempting for many business owners to put all expenses on personal accounts when first starting. They don’t have to set up business bank accounts or credit cards, which makes things easier initially.
However, you’re creating more work for yourself in the long run. You need a way to clearly distinguish between personal and business expenses. You won’t be able to deduct costs from your taxes if you can’t.
It’s much easier to do this with dedicated business accounts. Use business accounts for all your finances from the start to save yourself more work in the future.
3. Get Financing
It’s great to start a business without borrowing money. You don’t have to rely on anyone and don’t have any interest payments. However, not using financing isn’t always feasible if you want to grow your company.
There may come a time when you have an opportunity and don’t have the cash on hand to take advantage of it. In situations like this, financing can save the day.
Whether you prepare loan terms beforehand or set up a line of credit, make sure you’re ready with financing if you come across great opportunities. Being able to take advantage of opportunities can help you grow your business faster than you would if you only relied on cash in the bank.
4. Negotiate With Vendors
If you’ve been with your vendors for a while, then the chances are good you’ve noticed prices go up. This happens both in the business and consumer world. Luckily, you don’t have to accept those changes if you have options.
You always have the possibility to negotiate with your vendors. Call up your support representative to see if there’s anything they can do on your bill. If you express you’re willing to leave for another company, they are more likely to work with you.
If you can’t get a better deal from your current providers, start shopping around for your other options. In most cases, you can find a better deal and can save money on your monthly bills.
5. Stay on Top of Invoices
Not every customer will pay as soon as they make a purchase. This is especially true if you sell directly to businesses. You’ll send your customers a PO with terms that allow them to pay in the future.
However, not every customer will fulfill those terms. They’ll end up paying late and causing a cash flow disruption for your business.
It’s crucial to stay on top of your invoices to keep track of unpaid invoices. Make a routine of looking through overdue accounts that are past due and reach out to customers to figure out what’s going on. You want to get everything paid as soon as possible and keep track of problem customers in the future.
6. Use a Professional Accountant
Even if you can handle your business finances on your own initially, it’s probably not a great idea once you get things going. Unless you’re an accountant, you won’t have all the knowledge professional accountants have. That can lead to mistakes.
It pays to hire a professional accountant to handle your company’s finances. You can hire someone in-house or work with an accounting firm.
Doing this will save you time and allow you to focus on your own business tasks. As a result, you’ll have great books and can get more done during the day.
7. Get Proper Insurance Coverage
Even though accidents don’t happen often in business, they do still occur. While some of those accidents may not be a big deal, some may cause severe damage and cost your business money.
If you don’t have excellent cash flow, you may have problems paying for some of the damages. Luckily, you have many business insurance options that can help.
Whether you purchase key person, general liability, business income, or property insurance, make sure your business has coverage on all bases. Your insurance will add to your monthly expenses but will ensure you don’t dig yourself into a hole when you take care of your damages.
Managing Business Finances Is Easier With Experience
There is a lot to get right when you first start managing business finances. However, once you set up a great system, things get easier as you know what to do and expect. Use the tips above to improve your company’s financing to ensure you have cash for the future.
Of course, you’ll need more than great finances if you want to succeed in business. Check out the latest business posts on the blog for more great advice.