5 money management tips for small businesses
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Money management involves tracking and planning business finances which includes budgeting, spending, saving, and investing. Sound financial management forms the basis for profitability in any business. Money mismanagement, if not quickly and effectively addressed, can lead to business collapse. To succeed at money management, adhere to consistency, timeliness, justification, documentation, and certification.
To keep your business running, you should have enough money to cater for expenses and more reinvest to ensure growth. Here are some money management tips for small businesses:
1. Ensure good bookkeeping
Bookkeeping is the maintenance and management of business financial data. Most of your business decisions largely depend on financial reports. Since these reports are data-based, their accuracy leads to informed financial decision-making. To ensure your books are accurate, up-to-date, and professionally maintained, hire the services of a financial expert like Pherrus Bookkeeping Sydney. This helps you mitigate costly financial mistakes that could heavily impact your business and cause losses.
2. Keep separate bank accounts for business and personal use
When you mix business and personal finances, you may have disorganized financial records, leading to poor spending and lack of growth. It also makes it challenging to track withdrawn and deposited funds, making it hard to monitor incoming and outgoing business money. Separating business and personal bank accounts helps you monitor your expenses, reconcile your books, and track profitability using periodic financial statements. Additionally, using your business bank account and credit cards for business only ensures you keep a clean audit trail.
3. Build strong business credit
Access to credit is your business’s lifeline. It enables you to obtain expansion capital, cover daily expenses, hire more staff, purchase inventory and help ensure enough cash flow for the business. When you build business credit, your business gets more financial opportunities. This is because lenders, banks, and suppliers depend on business credit reports to determine the creditworthiness of your business. With strong business credit, your company won’t have trouble accessing the necessary funding whenever the need arises.
4. Pay your bills on time
Late payments of bills may cost you late fees, which will affect your business profitability. Ensure all your credit card and loan repayments are paid on time to avoid hefty fines. In addition, paying taxes on time protects your business from penalties. Set up monthly reminders so you can pay bills on time. Since young companies’ profit-loss margin is usually very thin, avoiding late payments ensures that your bottom line isn’t affected.
5. Monitor your spending
Do you know how much money your business spends on a daily, weekly, or monthly basis? Failure to monitor your funds could lead to misuse of business money and overspending. If you have several business accounts such as a credit card account, savings account, and checking account, knowing how much you spend from each helps you stay on top of your finances. Consider limiting the use of business credit or debit cards because you may end up spending more without realizing it.
Endnote
Money management is the key to business growth and success. Maintaining proper financial records will help with data-based decision-making essential for successful business operations.
