7 Financial Management Tips You Need to Run a Business
Financial management is an important part of running a business. It helps you make sure that your company can stay afloat and thrive as it grows. While it’s easy to get caught up in other tasks, managing the money is essential. In fact, if you want to be successful, then you need to manage your financials carefully. Here are seven tips to help you do just that.
Have a Financial Plan
While businesses often have a marketing plan, a sales plan, and even a general business plan, sometimes the nitty gritty details of financials get lost somewhere. It’s important to define the problem and then create a plan to solve it when it comes to money. Knowing where each dollar is spent for instance is one part of a financial plan. Paying business taxes is another part of the plan. Planning for future business needs and growth is another. Creating a financial plan from the beginning is a great way to set your business up for success.
Once you’ve defined your current situation and identified the problems that need to be solved, it’s time to set some goals. You should set short-term, mid-term, and long-term goals depending on how far ahead of yourself you want to look when planning for your business money management. For example, a short-term goal could be paying off a lease on an important piece of equipment. A long-term goal could be setting aside resources to help you buy a new property to expand your operations in the future.
The beauty of technology is that it can simplify, condense, and help you analyze financial data. Leveraging financial management software helps you to keep everything in one place so that you can get a better picture of what’s happening in your business. These can include apps to track expenses, accounting software to track finances, a CRM for your customer relationships, and even a project management tool.
Know Your Assets and Liabilities
The next step in managing your money is knowing what you have. This may seem obvious, but it’s actually a very important concept to grasp. Your assets are things that belong to you, such as cash, inventory, and accounts receivable. Liabilities are the opposite. They’re things that belong to someone else, such as loans or accounts payable.
A basic understanding of what these categories include and how they relate to one another can help keep your business on track. If you don’t know how much money is coming in each month or what bills need paying, how can you make sure that those expenses are covered? Knowledge about assets and liabilities will help ensure a smooth operation for years down the road.
If you don’t have a weekly meeting, start it now. Seriously. It should be short and sweet—no more than 20 minutes in length. Keep it focused on actionable items that can be accomplished in a week’s time frame so that everyone leaves with a list of things for them to do. It can also be used to show financial projections, sales goals, and even other important company information. These weekly meetings help everyone stay on track and helps to keep the finances in order.
Know the Numbers
As a business owner, it’s important to know the numbers. While you don’t have to be the one crunching them all the time, getting a regular report from the accounting department can help you understand the health of your business. You’ll be able to see when something might need a course correction to improve sales, or when liabilities need to be cut to ensure the health of the company. Checking these numbers monthly is typically more than enough. It helps you to identify what’s happening and to provide leadership when needed.
Profit is the difference between revenue and expenses, which means it doesn’t include your salary. It’s calculated after taxes and all costs have been paid, so if you don’t want to risk running out of money, it’s important to keep track of exactly how much each item costs. A percentage of sales should be going to cover all of your overhead, including salaries, rent, loans, and more. Knowing your profit margin can give you a good insight into how to expand operations and continue building a successful business.