Managing your businesses finances can be a headache. Poor management of cash flow is one of the main reasons why small businesses fail. Income is what keeps your business going, so it is important that you allocate a decent amount of resources into managing your ingoings and outgoings. Use the following information to highlight areas to help you establish good money management practices or to improve on your existing techniques.
1. Invest the majority of your profits back into the business
Although it can be tempting to spend profits on rewards for yourself, in the first few months of your startup, it is more beneficial to invest profits back into your business. You will need to withdraw a certain amount for your living costs. But resist the temptation – at least at the beginning – to spend money on things that have no value for the business.
2. Choose quality rather than quantity when it comes to recruiting
Employee wages will be one of your biggest outgoings so think quality rather than quality when hiring staff. Instead of paying lower wages for lots of inexperienced staff, pay the same amount for less for skilled staff. Ensure that your employees are working to their full potential. Once your business takes off, you can start to think about increasing the manpower.
3. Hire a professional accountant
Most business hire a professional accountant to help them organize their finances. Accounts can assist with tracking cash flow and measure the financial performance of the business. Like many small companies, you may think you can’t afford an accountant. But there are options to hire services on a part-time or even on a one-off basis. If you need an accounting company in St. Louis, for example, have a look online. Alternatively, ask for suggestions from other startup companies in your network.
4. Digitalize your finances
It is a good idea to invest in robust financial software for your business. Computer programs designed for business has become so sophisticated that they can do many financial admin tasks on an automated basis. These are useful tools to have as they minimize the risk of human error when it comes to basic finance processes.
5. Be frugal
When it comes to purchasing, in the early stages it is recommended that you only invest in things that your business absolutely needs to be able to operate. Although it can be tempting to spend money on things that will make your company stand out, it could lead to money problems. Once your company is more established, you can then think about those little extras.
When dealing with suppliers, especially if you are buying in bulk and are likely to be a returning customer, it is acceptable to try and negotiate a discount. Take advantage of opportunities to pay at a later date rather than on the spot. This will allow you to pay your bills in order of priority.
By applying the information provided in this article to your business, keeping track of your cash flow needn’t be complicated.