An important part of managing a successful business is ensuring your finances are in order.
Having access to cash is critical for its long-term survival. To help, here are 5 timely tips to manage your finances.
1. Use Proper Financial Tools
One of the most important things that you can do for a viable business is to manage your finances. In fact, people can determine the health of your company by looking at your books. For example, your cash flow statement shows how much inventory you’ve sold; spent, profit, cash on hand; cash you owe and how much cash is owed to you. This gives a clear picture of your finances; such as, determining profitability, managing cash flow and identifying issues in your company.
2. Practice Cash Flow Management
Having a firm hand on your finances is paramount. In fact, it can make or break your business. As your business grows, so should the health of your finances.
Like the old saying, “You have to spend money to make money.” For many business owners, cash flow is the lifeblood that keeps you in business and is needed to build cash reserves to finance future growth.
3. Manage Your Receivables
Do you like getting paid? We all do! The thing is, if you don't have a system in place to handle customers who pay late or worse...don't pay at all; then it can impact your cash flow. Implementing a collection policy and practicing timely follow-up with customers are good steps in reducing potential collections. These measures can ensure timely pay, thus ensuring regular cash flow.
4. Use Credit Effectively
Would you purchase a house with a credit card? Of course not! Matching the right type of credit for purchases is essential for good credit management. For instance, short-term cash needs like inventory should not be the same as the credit used to purchase new equipment or longer lived asset like a new building.
When the need arise to apply for a business loan, work with a lender that you trust.
5. Measure Your KPI’s
As a business consultant, I've consulted with many business owners who thought that they were doing well, only to show them that they had room for improvement. It is important to have key performance indicators (KPIs) to measure progress against given objectives including: net profit margin, profit per employee, sales per employee and so forth.
In closing, business owners must step out of the day-to-day chaos and look at the bigger financial picture. Use these tips to manage your finances.
Get more career and business advice from Sylvia via her blog sylviabrowder.com as well as nawomenrise.com!