Managing the ebbs and flows of your finances is critical to maintaining business growth.
When businesses are able to track their financial affairs, they are better equipped to handle unexpected debt, stay ahead of their credit bills and make smart investments for the future.
There are some other financial details that play a role in business prosperity. Here are five factors to consider:
Properly Managing the Books
A good bookkeeper or accounting software can keep income and costs well tracked and organized. Day-to-day management of business costs and income are critical things that assist you in keeping your financial picture looking healthy. This includes reviewing costs, making projections and not delaying in sending out invoices.
Technology and accounting applications have come a long way, but this doesn’t replace the need for an accounting professional. Don’t mistake easy accounting software with educated accounting oversite. Misclassifying funds can be a costly mistake.
Nail Down the Invoice and Collections Process
As noted, sending out invoices as soon as possible is ideal. There are other steps that will improve this vital workflow. Consider setting up payment terms of seven days so that they are not forgotten. Follow up on sent invoices as gentle reminders to yourself and your client of any outstanding payment. All invoices should be traceable so they can be easily cross referenced with other sources and documents.
Regardless of your invoicing and collection process, be sure you have proper contracts or signatures on your invoices whereby your customer is agreeing to certain payment terms or interest on late payments. You will find it difficult to collect in the event of legal action without proper documentation.
Keep Bank Accounts Apart
Co-mingling funds is just not a good idea.
The results can include unexplained losses or worse, major headaches when it’s time to file taxes.
The rule of thumb is to keep your businesses’ money separate from your personal account. This will enable you to track profitability without ambiguity, and it will also serve as a time saver.
Pay Yourself First
One of the wisest saving tips one learns is to pay oneself first. For those who do not own a business, this means setting aside a specific amount of money from each paycheck and stashing it away for a rainy day.
The same can be said about your business affairs. Setting aside an allotted amount of money is designed to test the profitability of your business and build resources for the future.
Don’t Lose Sight of Larger Business Issues
There may be a time when your business will have to pay legal fees, which is something big to keep in mind. The important part is to manage the costs associated with legal challenges before they balloon out of control. In order to maximize the per-hour rate you’ll pay for legal advice, set clear expectations to your legal team about what you must accomplish. Other cost-saving methods include billing options that best align with your needs and you can also look into payment deferment until the end of the process.
Other bigger issues businesses could encounter is the decision of renting or leasing office space and equipment. Renting equipment allows businesses to avoid maintenance costs and renting office space can make it easier to expand down the road.
Finally, businesses should remain conservative when it comes to premature spending. It can be tempting to begin making purchases and investing before the appropriate cash flow begins. Premature spending can be a problem though, and is totally avoidable with proper planning and business foresight.
If you have any questions about the above, feel free to contact us!
