5 steps for boosting your business finances
Could your small company use a financial shot in the arm? Do you sometimes wonder how to invest excess funds for maximum returns? If you answered in the affirmative to one or both of those questions, it’s wise to review some of the time-tested techniques for making your business’s finances more muscular, efficient, and organized. For most owners, the process begins with a simple budget review and update.
That means combing through expense items line by line in search of potential savings. Additionally, a large number of entrepreneurs opt to invest in rental real estate. Others discover ways to get more bang for their advertising bucks, save by taking vendor discounts, and outsourcing chores that are better left to experts. Here’s how to get underway.
Invest in rental properties
Consider using real estate pro forma sheets to evaluate rental properties before investing in them. A detailed pro forma will list all the known and estimated figures for potential income and expenses associated with a particular piece of property. Don’t put your hard-earned capital into a property without a pro forma as the initial guide. Keep in mind that the financial world uses a wide variety of specialized terminology that can be confusing to the uninitiated. That’s why it’s essential to be careful, use good judgment, and get solid advice before moving forward with any real estate deal.
Update and extend budget categories
At least twice per year, scour the monthly business budget as a way to update categories, adjust amounts, and search for areas where you can cut expenses. Explore the possibility of making expense categories more specific so you can monitor them closely and make appropriate reductions when necessary. Turn the common catch-all category of office supplies into three or four-line items in order to track furniture, paper, ink, and other varied categories separately. The more you know about an expense in detail, the easier it is to control cash outflow and spending.
Review advertising effectiveness
Don’t let a month go by without a complete review of advertising effectiveness. For many smaller enterprises, promotional spending is one of the largest categories of the income statement. Track campaigns closely whether they’re conducted online, on TV, or via another form of media. Smart managers know where every dollar of their ad money goes. During monthly reviews, they dig into the numbers and find out which efforts are worth the money and which ones should be scrubbed.
Take all vendor discounts
One common vendor practice is to offer a full two percent discount on purchases paid in full within 10 days. On repeat buys over the course of a year, missing those offers can represent a large amount of lost money. The solution? Set up accounting systems to automatically remit payment to all vendors within the 10-day limit when such discounts are available.
If your company has no in-house personnel to do a task, consider outsourcing the work. In the long run, sending jobs to those who can do them more efficiently, faster, and better makes good sense and has the potential to attract new customers via a more streamlined business operation.