For small businesses, managing their cash flow and business finances can be a constant challenge. Any successful business owner will tell you that it is important to have a plan in place. Here we look at some of the key practices that can help small businesses to control their finances better.
Why it is important to have a plan
A clear and concise business plan is important. Business owners should set out clearly their goals and objectives from the beginning. Knowing where you want your business to be in the future will help you set out your financial targets, plan your budgets and control your profit and loss and cash flow more effectively.
Control your business cash flow
Businesses must have a steady cash flow to survive. Things can be quite difficult if your business does not have enough cash to cover day to day expenditure. It is important to have enough cash in your business to cover the essential costs. Knowing your minimum cash flow required for your business to operate will ensure that you are always in control.
Be aware of your company’s financial position
This may seem like common sense but it is important to know exactly how your business is performing. Knowing what your sales are and how much cash your business has in the bank will be crucial to managing your business finances on a daily basis. This will help you to keep track of your sales targets and plan your sales strategies for the coming months.
Filing your tax returns
Not filing your tax returns on time can be extremely costly to your business. These are also fines that could easily be avoided and will be unnecessary extra costs to your business.
Have up to date financial records
To manage your business finances effectively, having up to date financial records will be important. It can be quite easy to miss paying bills on time or lose out on possible invoices owed if your business records are not up to date.
Chase up unpaid bills and moneys owed
Debts that are owed to you is simply money owed to your business that is tied up in another company. It is vital to the success of your business that unpaid debts are not left to go idle.
Have a business that is efficient
In the current economic climate, businesses are looking for increasing ways to save money. There are many opportunities for businesses to save money on production costs through changing suppliers, saving energy and readjusting working practices. It can be wise to look at your operation and evaluate what areas could become more cost efficient.
Having an effective stock management system in place can help manage your business cash flow. Many companies end up having working capital tied up in the business by purchasing more stock than they need. Simply by only buying stock that you need, you can ensure that you have more working capital free for your business.
Get your pricing right
Having the right pricing for your business products and services can be important to managing your business finances. Prices that are too high can see low sales. Prices that are two low may see more sales but at a reduced margin meaning your business could actually be losing money. Research what prices your competitors are offering. If you have a product that is unique it may be possible to charge a higher price and drive a higher volume of sales at the same time