Although successfully running a business comes with its fair share of inherent challenges, many small business owners cite money concerns as one of their most significant issues. Being strapped for cash can be very stranding, especially if you have a business to run. However, cash flow mismanagement happens occasionally, whether accidentally or through contributory negligence.
Fortunately, small business owners can take charge of their enterprises’ financial situations through stellar money management practices. Australian financial planning software can assist business owners in protecting them from extensive periods of negative cash flow while keeping it on track to exponential growth. Here are five money management tips to help you manage your company’s funds more effectively.
1. Manage Your Business Credit
The importance of credit management for small business owners cannot be overstated. As your business grows, you may find it necessary to take out more insurance policies, purchase or rent more space and secure more loans to finance your pursuits. Getting approval for these acquisitions and more is almost impossible with bad or non-existent business credit. That said, here is how you can manage your business credit:
- Confirm whether your business already has a credit file, and update it with accurate information if necessary.
- Build a credit history by listing company expenses under your business name and settling them via a commercial bank.
- Understand the factors that influence your company’s credit rating, e.g., paying bills on time, and act accordingly.
- Monitor your business’ credit file and update it as necessary, i.e., ensure it reflects changes that impact your credit rating, like the number of employees, revenue, outstanding liens, and location.
- Monitor each client’s credit reports to determine the amount of credit you should extend and on what terms.
2. Separate Business And Personal Expenses
While separating business and personal funds is not a requirement, it is crucial for money management purposes. Besides, the list of reasons not to mix business and personal accounts is virtually endless – personal liability, inaccurate accounting records, tax issues, and many more.
To draw a clear line between business and personal expenses, create personal and business budgets, and adhere to them without any overlap. No matter how tight things get, fight the urge to secure business finances using personal funds.
3. Monitor Your Accounts Receivable
If your business regularly extends credit to customers, you may already be accustomed to late payments for goods sold or services rendered. Given all the moving parts involved in running a business, it might be easy to lose track of accounts receivable without proper systems in place.
To stay on top of all your accounts receivable, create and maintain an up-to-date accounts receivable summary that indicates the customers in debt, the amounts due, total receivables, and approaching due dates. In addition to tracking, pursue payments by sending late notices and invoices or offering early payment discounts if your business needs the money urgently.
To effectively monitor your accounts receivable, leverage the capabilities of InvoiceSherpa. By integrating into your accounts receivable management, you not only streamline the invoicing process but also enhance your ability to secure timely payments.
4. Keep Track Of Deadlines
Failing to stay on top of your bills might lead to a perpetual state of negative cash flow. Not to mention, losing track of major deadlines might lower your business credit, cause sour vendor relationships and force you to incur penalties or added interest. To avoid these, record all important due dates and set reminders weeks or days prior.
5. Stay Frugal
Frugality (not necessarily penny hoarding) is a great way to combat overspending. Simple steps such as buying major equipment second hand, going green to spend less on utilities, and utilizing rebate offers for supplies can save you a lot of money long-term.
