Essential tips for small business: managing your finances
Money isn’t the only reason small businesses fail — see this article for a list of common pitfalls — but it sure is a big one. You can have the best product or service possible, but without a healthy cash flow to pay the bills, your business will be destined to go the way of countless other failed firms.
So what can be done to manage your money to avoid financial failure? Below are some tips that won’t take away too much time from your business, while helping to make sure you don’t end up ‘in the red’.
- Clear targets
How are you supposed to know whether or not you have been successful if you don’t know what ‘success’ looks like? Spend time setting clear financial goals for the short, medium and long term so that you know what you are working towards.
You might also want to spell out a top and bottom target so that you are prepared for a ‘best case’ and ‘worst case’ scenario. Then, develop a method by which you can track your progress against these goals and spot any performance issues before they turn into bigger problems.
- Accounting made easy
If the thought of wading through a mountain of paperwork sends a shiver down your spine, you’re not alone. Accountancy software, however, makes it much easier to input your financial data, run reports on key metrics and track your financial picture ‘on the go’ using your cell phone.
You can also integrate other functions so that your software can assist you to prepare and produce tax forms for example, turning tasks that might seem like a chore into a seamless part of your operation. All of this frees up time to spend on the rest of your business and gives you a clear and accessible picture of your current state of play.
Any small business needs to develop a system whereby invoices are prepared and delivered as soon as the product or service is delivered. The longer you wait, the more you are adding to the delay between performing the job or service and getting paid for it.
There is software out there which can help you automatically issue these to speed up the process. Don’t be afraid to chase late payments either — getting the money that you are owed is absolutely vital for your cash flow.
- Be ruthless on spending
It seems obvious but it is still worth regularly reminding yourself — if you fail to keep your spending under control, you’ll soon lose control of your finances. This is easily done if you try to take on too many staff when you’re just starting out, or you invest in lots of expensive equipment that will only really ‘pay its way’ after a period of several years.
That’s why you need to carefully manage growth (your targets will come in handy here) and thus learn to walk before you run.
The above points are just a handful of essential tips for managing your finances. Following these will be a good start for you and your small business, and increase your chances of achieving solid growth.
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