Cash flow is what keeps a business running. Without money, your business will not be able to meet its immediate needs and may end up going in losses. It is therefore prudent for all businesses to manage their money well.
Money management is the actual process of handling the finances for your business through practices such as budgeting, tracking income and expenses, setting goals, taking care of invoices, investing, among many others.
With good management of money, you are able to take your company where it needs to be and avoid any periods of negative cash flows, where you are forced to borrow in order to stay afloat. These best practices give you tips on how you can do this.
Best Money Management Practices for Business
Always Stay on Top of Deadlines
You should always know when your bills are due. This includes loan repayments, accounts receivables, and any credit card payments. This kind of practice ensures that you never get into debt, which can set you back.
Monitor Business Spending
You should always know how much are your business spends on a daily, weekly, and even monthly basis. If you are not able to monitor spending, you may end up with high bills that are unnecessary, and will only lead to debts.
Most business owners keep accurate accounts of how much they are spending, and monitor their savings, and credit card accounts. Ensure that you know the exact amount of money needed for your business, and keep track of all the withdrawals.
Keep A Watch Over Account Receivables
If your business usually offers customers credit, you should be aware of the number of customers who owe you and how much, while bearing in mind that some of them may not pay you for the goods or services they were provided.
This is just part of the business. However, ensure that you call them frequently to remind them of their obligations, and if this doesn’t work anymore, maybe you shouldn’t extend credit to them.
Avoid Mixing Personal Funds with Business Funds
This is very easy to do, especially if you are an entrepreneur, but it is the first sign of bad money management. You should never take out from business funds to deal with a personal problem, even if the money is rightfully yours.
Mixing these funds together will only lead to more disorganization of records and you will find yourself overspending and missing growth opportunities. Also, when you combine funds, it gets difficult to keep track of deposits and withdrawals of the business-related funds.
Time All Your Purchases
In order to avoid instances where you have low cash flow, it is wise if you time your purchases. Do not make any unnecessary purchases unless you have paid all of your other bills. Wait until you have accumulated enough cash that can cover new expenses.
Timing your purchases also helps in decreasing your tax liabilities. Before the year ends, you may consider purchasing tax-deductible items so you can claim them as your tax returns.
It doesn’t matter how big your business is, budgeting is vital for the success of every business. You should have short-term as well as long-term budgets that must be maintained as it help you in setting revenue and expenditure goals.
The budget also lays out all of the expenses the firm is operating with. When you look at your budget, you can tell just how much you are spending, and what items need to be cut out of the budget if they are not important.
A budget will also give you a forecast of the amount of revenue the business will receive during each quarter. If that is low, there you must find new ways of receiving more money or cutting down on your expenses.
Sometimes it is important to be strict with your business so that you can achieve your goals. Otherwise, you may end up with a business that is not bringing in the kind of money it should. It is important to run on budget at all times.