Most business owners aren’t exactly thrilled if you ask them how they’re performing money management for their small business. That’s probably because they haven’t given it a second thought.
So what exactly is money management? Well, it’s a combination of techniques and strategies to manage your business’s finances. It includes budgeting, setting goals, tracking expenses, and income.
Businesses that do not want to go into negative cash flow must absolutely have a money management plan in place. Failing to have a money management strategy in place can lead to lead payments, salaries, unforeseen cash flow issues, and much more.
In this article we’ll be discussing the top money management tips to keep your business running effectively.
1. Keep Track of Deadlines
You need to be on top of your deadlines, whether they pertain to accounts payable, business loan payments, invoices, credit card payments as so on.
Losing track of deadlines can make your cash flow situation really poor. If you miss a credit card payment for example, your business’s credit score will be negatively impacted.
Not knowing when to pay bills can also cause you to actually pay late surcharges in case you miss a payment. This sort of inefficiency can easily be avoided by using a scheduling app such as Google Calendar.
Simply create recurring events for monthly deadlines and you’ll be reminded on your phone whenever a payment is nearing its due date.
2. Accounting Software
One of the easiest ways of messing up your business’s cash flow is by lazy and inefficient accounting processes.
Business accounting that’s being run and managed through Excel sheets isn’t really the best way to go about it. Excel sheets are cumbersome to manage, and can’t really be automated. They’re better than accounting that’s done on paper, but that was true 20 years ago as well.
In this day and age, you need accounting automation software that’s built for the job.
One such example is Waveapps, accounting software that’s simple enough for small businesses to use. Waveapps allows you to automate cash flows, keep books balanced and much more. You’ll appreciate the convenience of all this when it’s tax time, as it’s going to take a fraction of a time to figure out your finances.
Do the same in Excel and you’ll be wasting valuable time and resources on something that can be done more efficiently in bespoke automated accounting software.
Waveapps offers its accounting software totally free for you to get started, so you can see the value before committing to a paid plan.
For a Waveapps alternative, FreshBooks cloud accounting platform offers free invoice templates and a free trial with affordable plans for small business owners.
3. Keep Track of Expenses
Don’t be oblivious to the amount of money you’re spending on business expenses. If you don’t monitor your business spending, you could be racking up bills unnecessarily.
Why is monitoring so important? Because it helps keep your expectations and actions in check. If you see that you’re spending more in a month than is normal, or the previous months, you can at least investigate the reason.
Monitoring your expenses allows you to keep checks on business needs and if you’re paying for something you shouldn’t be.
Many companies fall into the trap of using too many software services, for example. That’s because they do not monitor monthly spending.
4. Open a Separate Account for Your Business
Making personal and business expenses on the same bank account is not advisable in any way. Not only will it make taxes a nightmare, but you’ll just have a hard time dealing with your bank in general.
Let’s say you want a bank statement of the last 6 months. What you’ll get is a mix of your personal and business credit and debit payments. You’ll have to painstakingly sift through each line item and figure out which is which.
Also, if your business’s earnings are going to your personal bank account, you might be tempted to use some of them for personal expenses. It can also of course, be the other way.
To avoid all of this hassle, just open a separate bank account for your business. This will help you track personal and business expenses more easily and effectively.
5. Audit Your Inventory, Software and So On
Is your business subscribed to web services it no longer uses? Are you still paying for an ex-employee’s G Suite account? Do you have too many office supplies?
Conducting a regular company audit of supplies, software and tools can often unearth lots of unnecessary expenses.
6. Create a Business Budget
Forget about visualizing a budget for your business. If you’re serious, take some time and come up with a budget and put it on paper. This will help you plan expenses and set revenue goals.
Your budget should detail how much your business should be earning in revenue in order to be profitable. Your budget should also dictate how much you can spend on business expenses.
This budget will later guide your financial actions very well. If you find you’re spending more than the projected revenue, you’ll be inclined to stop spending until the business is making enough revenue, which of course will be laid out in the budget plan.