When it comes to business, the bottom line is what matters. Regardless of your motivation or what matters most to you, your business needs to be financially secure to be any kind of success. The money is at the core of how strong your business is. If you’re not taking care of your finances, you’re liable to be rocked to the point of losing the business when a crisis arises. Here, we’re going to look at how you should be taking care of the financial core of your business, as well as preparing it for challenges in the future.
Create a plan
As with all parts of the business, it’s best if you have some sort of plan that can help you figure out your finances. A business plan can help you define how much you’re going to need to remain operational and how much you need to make to keep things running and growing. It can also help you when it comes to talking to other financiers. If they can see that you have a sensible projection on how you’re going to use the money they provide, they’re more likely to agree to support you. Finance is just one of the reasons you should seriously consider a business plan.
Create an emergency fund
You should also be prepared to deal with things that come from outside of the plan, as well. Insurance and other protections are an important part of how you keep your business safe from unexpected dangers. But you can’t and shouldn’t insure absolutely everything you can. Instead, you should save up towards an emergency fund with a cut of the profits. This fund is to help you deal with the most unexpected of financial drains. Make sure you keep it separate from all you other funding. In fact, for your protection, you should make sure that you separate personal and business finances as well. The emergency fund keeps you from digging into other finances or finding yourself in debt too quickly.
Keeping a closer eye on things
One of the reasons that a lot of business owners can find their finances start to slip is because they took their eye off the ball. They didn’t get a proper look at where their money was going. That’s why, from day one, you need to be organized in your approach to record-keeping. You need to have any expenses and overheads filed. Not just physically, but kept in a digital record as well. Not only can tracking these finances assure you of where your money is going. It can also be good to have the records easily at hand when it comes to looking for those tax deductions. Start losing track of your expenses and you could be surprised by how much you’re spending.
It’s not your expenses you want to track, either. You want to track what it is exactly you’re doing with your money. You want to set goals so you can see that any changes you make are taking you in the right direction. Finances can be a difficult thing to get a grasp of on the whole. So separate it into elements that are a lot easier for you to track. Create financial key performance indicators. Set yourself attainable milestones based on those KPIs. The more you find yourself hitting those milestones, the more you’re going to understand your own finances. From profit to payroll to inventory turnover. Use KPIs to help you get a better view overall of your business. Sites like http://compudata.com can help you figure out which KPIs exactly might help you and why.
Consider hiring an accountant
It is important that anyone running a business strive to better understand the finances behind it. Money literacy is an important skill. But to be fully in control of your accounts is no small feat. If it was, then we wouldn’t have need of accountants. As it stands, they can be the perfect ally to help you fully understand how your business is going. They’re not necessarily there just to crunch the numbers, either. An accountant can also help you find better ways of looking after your cash. They can tell you which investments seem like a smart bet and which moves could end up losing you a lot of money. Treat accountants like advisors, not like calculators.
Always have a few funding options on the horizon
When running a business, you would like to be able to grow solely off of your own profits. To have enough cash to take care of all potential problems yourself. However, that’s not always the case. Particularly when you’re scaling. You’re likely to need a bit of support to effectively scale to the level you need to. That’s why you should always keep your eye on potential funding and lines of credit. Sites like https://factoringdirectory.org can help you not only find funding options. They can be as specific as helping you find the best options for your precise industry. Do your research and spend some time working on bids that you might send out in future. You never know when you might need to get the ball rolling.
Keep your employees as best as you can
It also pays to take a closer look at exactly where your money is going in the business. Not just keeping a record of your expenses and overheads. You should also look at protecting yourself from the risk of those bigger payments becoming a necessity. For example, look at your employees. Staff are an expensive part of business. But it’s not keeping them in employment that’s the issue. It’s hiring someone new. The recruitment and training process is easily the most expensive part of having staff. So work to retain your employees as best as possible. Even if it means spending time and money on keeping them motivated and developing. Sometimes you have to spend to save.
Know when to not hire
As we’ve stated, recruiting is expensive. So why would you do it when you don’t have to? However, the simple fact is that plenty of business owners do just that. They hire staff when they would do much better in hiring a service. There are a lot of different reasons to consider outsourcing. For example, if a task requires a specialist, like IT systems, that you can’t afford to support. Or if the task only needs a short-term hand like graphic or website design. You need to think carefully about whether or not you really need that extra member of staff.
Don’t let money float in the ether
There’s a difference between having a good number of customers and having a healthy intake of money. This is particularly true where invoicing is your primary form of accepting payment. We all know how easy it is for invoices to be late or get lost. If you rely on invoices, then you can’t afford to let this be the case. First, use invoice financing to protect your money. Secondly, you need to deal with customers who are late. Make sure your invoices have terms of payment attached to them. Include a late payment fee and date. Naturally, your customers need to know about this before hiring your services. Then it’s all about being polite and firm. You want to leave a good reputation with your customers. However, that doesn’t mean you should let them run off with your money.
Keep yourself covered
That invoice financing is just one of the kinds of insurance that you should consider. We’ve already talked about protecting yourself through an emergency fund. However, specific types of insurance are a much smarter method of making sure you’re insulated from specific risks. You may be wondering which kinds of insurance you should invest in. If you’re invoicing, we’ve already mentioned one. Otherwise, you should always spend on general liability insurance. Other costs you should consider are building insurance and business interruption. Also, a good worker’s comp plan. Decide which kinds of insurance you’re most likely to have need of and get yourself covered.
Time is money
Money isn’t just about your bills and how you protect the cash in the kitty. It’s also about the work that you get done. Efficiency plays a key role in making sure that any business is making enough money. Are you doing as much work as you can to make the most money in the shortest amount of time? The answer is most likely no. There are always ways you can improve the efficiency of the business. In an office, it might be as simple as systemising common tasks and rearranging workflow. In manufacturing, it might mean adopting lean principles. Check out sites like http://businessinsider.com to see how you might make your own business run more smoothly. Wasting fewer man-hours means wasting less money.
Saving money, creating protection for your business and finding ways to do more with less. These are the financial practices you should be striving for with your business at all times. Once you have the finances sorted, then you can finally shift priorities elsewhere.