Finance is the soul of every business, and being able to manage your business finances enables you to avoid unanticipated debts in your business and prevent the failure of the business. I am very sure that you would not want to incur losses, whether negligible or significant, in any business you do, and that is why I have developed this article to help you manage your finances, and in turn, minimize the loss in your business.
Here are a few great tips to help you control the funds of your business effectively.
- Employ Constant Recordkeeping.
- Have a Business Account Separate From Your Personal Account.
- Be Frugal
- Plan Ahead
- Create Budgets And Adhere To Them
- Manage Your Inventory
1. Employ Constant Recordkeeping.
Every good business should have a record of accounts, that should be updated regularly. These records can be single entry or double entry. They can also be journals (day books), balance sheets or income statements. It is very essential that you keep accurate and up-to-date records of your assets and liabilities, and your income and expenses, as well, to ensure you do not lose track of your business funds.
It also enables you to monitor the progress of your business, to know if it is improving or backsliding, and in turn, know what steps to take next. Furthermore, it can also help you to file your tax returns faster and more easily.
2. Have a Business Account Separate From Your Personal Account.
You should have a bank account, separate from your personal account, and solely for your business earnings. This prevents you from mixing up your personal expenses and your business expenses. It also helps you to know what profit you are making from your business, and if you are making any losses. Likewise, you can also know if your profit rate is increasing or decreasing monthly or per annum, and this gives you a guide, to know what changes to make or what things to do more in your business.
This is one very effective strategy in controlling the funds of your business. It also encourages you to save, by preventing you from using money meant for your business to settle life pleasures, or other things not related to your business.
3. Be Frugal.
A frugal person is one who is conscious or economical when spending. To ensure continuous availability of finances for your business, you should save some part of your income, and not be wasteful. No matter how successful your business might be, or how wealthy you might be, if you are thrifty, your business will likely resort to setbacks. Frugality keeps you prepared for the future of your business and makes you able to comfortably settle any unforeseen expenses. Frugality is a very essential attribute in running a business, and more especially, controlling your business funds.
4. Plan Ahead.
Planning for the future of your business is also very essential in managing business finances. The current state of your business might not be its state in five or ten years from now. The world is constantly changing and as Heraclitus, the Greek philosopher said, “Change is the only constant in life”.
Different factors can affect the state of your business, and so it is only wise to save a little amount of income regularly, or whenever you have enough funds, apart from your personal savings, in case you need it to settle anything related to your business in the future, or to expand your business, if you want to.
According to the chief financial officer of Tobias Financial Advisors, Edgar Collado, “Business owners should always keep an eye on the future.” Planning ahead can also help you search for and invest in growth opportunities for your business.
5. Create Budgets And Adhere To Them.
Creating budgets is very important in every business, and not only creating them, but also adhering strictly to them. A business budget is a plan on your intended expenses and incomes over a future period of time. Having a budget helps you monitor and control your spending and ensure your savings are enough for your future plans.
A budget helps you discover your long-term goals and work effectively towards them. Creating a budget and adhering to it ensures that you hardly ever end up in a position where you have stacked-up debts. Budgets also help you save for future expenses and most often keep you ready for, however, your business turns out to be in the future. Most of all, a budget helps you achieve financial stability, which is one of the goals of almost every business.
6. Manage Your Inventory.
Managing your inventory is very important in managing finances for your business. Your inventory is a complete list of the goods and materials in the building of your business. Managing your inventory helps you, not only to know, but also to regulate what comes in and goes out of your business. Inventory management is similar to recordkeeping, aside that your inventory consists only of goods and not money. By managing your inventory, you will be able to determine what aspects of your business are progressing and what parts are failing.
In addition, it allows you to know what goods you have in stock and those you need at a particular period. Inventory management affects almost every aspect of your business, from bankrolls to the accessibility of your products. Your inventory management plays a great role in determining the amount of profit and savings you will make from your business.
Undoubtedly, achieving maximum profit and financial stability are important goals of almost every business venture, and managing the finances of the business play a great role in achieving these goals.
No entrepreneur or business owner wants his business to crumble or incur a loss, instead of yielding satisfactory gain. So, if you put the above tips into practice in whatever business you may be doing, your business will hardly ever experience any form of setback or failure.