If you’re a small business owner, you’ll know that financial management is a core part of keeping operations running efficiently. And you’ll also know that financial management is more than just bookkeeping, balancing accounts and filing tax returns. But what does it really encompass and is there anything you can do to improve your company’s finances? Let’s explore this question in more detail.
Budgeting is Essential
If you fail to budget, you plan to fail. It’s as simple as that. With effective budgeting being one of the pillars of a successful company, you can allocate resources where they are needed most. You can track revenue and manage cashflow. Securing financial stability is essential when it comes to running a successful business and you’ll never achieve this without budgeting.
Yes, you’re just starting out in business and you’re probably putting all of your capital into your venture to get it off the ground. If, on the other hand, you do have some cash to spare, why not put it to work for you and try to make a decent ROI so you can reinvest the profits back into your business? You don’t have to invest a lot to make a substantial return.
If you cannot afford to buy a property outright, you can still invest in real estate by buying shares of properties. This means you can make some extra cash without having to deal directly with tenants. You can review the tax benefits of investing in real estate to ensure you take advantage of utilizing depreciation. Or you could even rent out one of the rooms in your home to earn some extra cashflow? If you don’t have the capital to hire a financial advisor to make investments for you, you can download a trading platform and research different strategies where you can make stop/loss orders.
Automate Bill Payments
Your time is going to be stretched as an entrepreneur and forgetting to pay bills might just become the norm. Interest rates may get higher and you might lose the trust of the people you owe money to. Instead of missing payments and using your precious time to organize transfers etc., why not automate the process? Setting up direct debits and using online banking is the way forward if you want to save time, save money and avoid late penalties.
Aim for a Good Credit Score
Your credit score will have a bigger impact on your operations than you might think. From dealing with suppliers and organizations, to choosing partners and borrowing from lenders, every aspect of your business might be affected if you have a bad credit score. Maintaining a good score will entice other entities and customers to do business with you and you’ll be solidifying the fact that you’re reliable and will not default on the loans that you borrow.
There are many ways to improve your score if you see it dropping. These include paying bills on time, establishing credit accounts with suppliers, decreasing your credit utilization ratio and disputing any errors that you notice. Typically, a good (but not great) score falls between 630 and 700. The factors that determine your score are different to those that will have an impact on your personal score so know what to look out for and make the necessary changes.