Running a successful business is a feat. There are numerous aspects that an entrepreneur needs to focus on, such as human resource management, strategic decision-making, etc. However, handling business finance is way more critical than all.
History holds a list of companies that had to wound down only because of their terrible financial management. In 2001, the now-famous Converse filed for bankruptcy due to an aggressive investment strategy against the ongoing market conditions. Later, the purchase of Converse by Nike took the brand to newer heights. Without adequate finances, a business can easily topple. Since capital investment is a critical resource in business, owners must make the best use of their money to maximize profits.
However, at times, handling business finances can be an overwhelming responsibility. There is much to manage and decide while ensuring that you are putting your money to the best use possible. If you happen to own a business and are troubled about the finances, you don’t need to worry anymore! Here we have a simple guide for you to help straighten up your money issues in no time.
Maintain Impeccable Financial Records
It is no rocket-science that the first step towards resolving your financial troubles is to have an accurate record-keeping system. Maintaining financial records is imperative for businesses. It gives you insights into how the company is performing, your current expenses, and what you can expect from your company in the future.
For example, keeping a quarterly cash flow statement gives you an overview of your cash inflows and outflows. It gives you a glimpse of the amount of money you’ve got and the amount you need to invest further. Another way is to create an expense tracking sheet. The sheet provides insights regarding your unnecessary investments in different areas. It will also guide you about the areas that can help you in saving money. It is worth mentioning that finance management can only be possible if your company ensures well-maintained accounting records.
Pay Your Taxes ASAP
Some companies may take it easy, but forgetting to pay your taxes on time or violating some tax rules can cost you huge! Managing taxes is not that difficult. However, it is best to hire a tax specialist to take up this job for you, since they know all the subject’s nitty-gritty.
Likewise, if you happen to get stuck in a tax violation case, you can hire the help of a taxation lawyer. They are skilled in offering tax counseling and can handle complex matters of the business transaction. A well-versed taxation lawyer guides you through his/her experience and puts forward a solution in the company’s best interest. They are highly qualified and often put to use the benefits of master’s in taxation law degree.
Another way to keep track of your business finances is budgeting. It allows you to set an upper and bottom limit to your revenue and expenses. Budgets are plans that help you gauge your business finances for the upcoming years. For example, you can create a five-year rental income plan that shows the cash inflows you expect to receive on your leased properties.
Budgets are a remarkable way to control your money issues. Since it works as a benchmark, you can quickly evaluate where you are failing to meet your set limits. Most companies produce variances consistently that help to analyze the differences between the planned and the actual figures. This way, you can assess the loopholes and what is causing the variances before your outflows go out of hand. Variances are a warning sign that there is something wrong. They help in control your expenses before they jeopardize your business finances.
Tweak Your Credit Purchase Terms
Having lousy credit terms can bottle up your money in debts. A way to ease this is to encourage customers to pay when they purchase and not buy items on credit. You can offer discounts such as a 5% price reduction if the consumer pays the amount upon any purchase. Managing debts is a whole separate task, and it is best to avoid clogging too much money in debts. Keeping your sales in cash is an effective way to manage your business finances.
Invest Idle Cash
If you have a pile of business savings, it is best to invest this cash into something that reaps more benefits. For example, you can invest in shares in another company, invest in a more new business segment that offers unique services, buy a rental property, etc. Owning several streams of income will help you cushion any losses in business.
Utilize Loan Financing
Most business owners get scared of loans and the burden they bring to the company. However, utilizing loans with favorable terms is a great way to provide financing to your company. You will often feel restricted because of the lack of finance to purchase equipment or add funds to your business growth. Nonetheless, borrowing is a perfect choice to manage your business finances to recover from business losses.
Managing a business requires handling several aspects. Business financing is one of the crucial areas of business, which, when ignored, results in unfavorable outcomes. It may seem like a breeze for a huge corporation. However, often smaller companies find managing finances a challenging task. The key lies in maintaining proper accounting records, keeping a detailed and consistent check on your business figures, and planning. We are sure that the tips mentioned above will aid you in keeping your company finances hassle-free.