Finance is the backbone of every business. It is important for organizations to know the state of their financial affairs to ensure that their cash keeps flowing. Poor financial management can adversely affect your business. It can lead to inefficiency and overspending. Far too many small businesses faildue to this problem. On the other hand, staying in control of your finances can help small businesses create and stay within their budget, keep a record of all their earnings and expenses, and avoid unnecessary debts.
Here are six ways in which small business owners can stay on top of their finances -
Review financial statements Financial statements contain critical information which reflect the financial health of small businesses. Business owners need to monitor their financial statements regularly to keep a tab on their past achievements and projected earnings. Accounting standards or the law require financial statements to provide a good deal of information about the company. The information help investors, creditors and analysts take informed decisions about the issues affecting the company.
Weekly financial snapshots The weekly financial snapshots help small business owners review the performance of their companies on a regular basis. This way, they can keep a track of cash reserves,
cash flow, sales, and outflows. It enables them tomake smart decisions about the future investments. Financial snapshots involve reporting, summarizing and recording the company transactions, and the economic activity through balance sheets, profit and loss accounts, so as to help small business owners take informed decisions.
ALSO READ: Growth Strategies for Small Businesses Cloud-based accounting software With a cloud-based business accounting software, small business owners can monitor their finances in real-time. This helps in keeping the business on the right track. With this tool, they can manage their business finances from anywhere. It also keeps the financial data safe and allow business owners to manage their books from computer, laptop, tablet or smartphone, anytime of the day. Further,they can give access privileges to their colleagues and accountants, who can login and work with the data online.
Meet your tax obligations It is important for all businesses to pay their taxeson time. If you miss your deadline to pay tax, VAT or to
file areturn, it can lead to hefty penalties. Also, tax compliance is necessary to avoid investigation by authorities. You need to be aware of all the rules and regulations. Doing so, can also help you save a lot of money on taxes in the long run. Most importantly, make sure to update your books on a weekly basis to stay on top of your finances.
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Collect your debts An uninterrupted cash flow is necessary for small businesses to ensure growth. It can be achieved by creating adebt collection plan. You should not allow people to get away with debts. Make sure to send invoices as soon as possible and do not hesitate to ask and follow up. You should come straight to the point when it comes to asking for your money. Urge your borrowers to pay within a certain deadline. You have to be strict if you want your business to be successful.
Cut down on your operational/sundry expenses: Reducing costs is the key to operational efficiency and every small business owner must strive to do it. Here is how you can reduce your overheads -
- Use technology for teleconferencing, online payments, open-source software and remote applications.
- Replace landlines with cell phones and VoIP.
- Digitize your invoicing, payments and documentation.
- Promote your business online through a blog or SMM.
- Reduce credit card debt to make your business financially healthy.
- Stick to your business budget to reduce costs.
- Explore co-working space or a home-based business
- Make sure to purchase the business software that you frequently use.
- Buy refurbished furniture and equipment.
- Reduce fund outlay by a barter arrangement.
By reducing operational overhead costs like electricity, water, heating, transport, postage and more, your business can save a lot of money.
ALSO READ: How to Revitalize Your Struggling Small Business Conclusion Running a small business is a difficult task. As an owner, you may need to wear multiple hats to ensure the success of your business. By incorporating the above-mentioned tips, you can stay on top of your finances and take your business to new heights in the years to come.
