Financial management is one of the most crucial aspects of any organization. If a firm wants to thrive in a highly competitive market, as well as a turbulent and unpredictable environment, it must manage its finances well.
Small enterprises, in particular, must exercise extreme caution due to the lack of a financial buffer.
You must have a good financial structure that can genuinely generate a profit in the long term. You cannot afford to make fundamental errors. Even one error might be enough to sink your company.
So, how can you traverse the intricate and perilous seas of the financial sea? The following are some excellent financial management strategies that might assist small companies with their money challenges.
1. Make a list of expenses and income items
Articles are needed to group similar expenses and receipts into the company’s current account. It will help you control and analyze the history of receipts and expenses. Important: don’t make too many items on the list, but don’t reduce it to 2 items either — find a balance. So that in the future you will understand how to work with the list.
2. Differentiate cash flow by type of activity
There are 3 main types of activities: operating, financial, and investment. By dividing the cash flow by type of activity, you will track where the company is operating in profit, and where you incur investment expenses. It will be easier to resolve financial issues in the future.
3. Group your wallets
Often, entrepreneurs can store money on accounts, cards, or electronic wallets. To organize everything, divide your money into 3 areas: current accounts, electronic money, and funds. In accounts, for example, you can store taxes and advances for clients, thus avoiding the possibility of spending them ahead of time.
4. Choose cloud-based financial management solutions
Recently, an increasing number of small businesses are starting to utilize cloud-based financial management solutions.
These platforms decrease entrance barriers since they are either free or reasonably priced. It turns out that employing cloud technology is more cost-effective than recruiting more staff.
Plus, you don’t have to have a lot of technical knowledge to use cloud solutions. Today in a few minutes with a couple of clicks you can open a bank account for International Payments for Business Owners so that you can make and receive payments within not only your own country but around the world without any confusion.
5. Look for anomalies and trends
The point here is that when you have already compiled a list of items and divided income and expenses, you can analyze each item. For example, you see that office expenses have increased – a reason to study the situation. This way you will take control of all the organization’s money.
6. Transfer money to funds
Many entrepreneurs use the mechanics of the fund system. To explain briefly, some part of the profit is transferred to funds: bonuses, team building, company development, reserves, etc. Such a distribution gives a clearer understanding of the flow of finances, be it salaries, taxes, etc.
7. Focus on receipts: there should be more of them than write-offs
This is the golden rule of money management! Monitor the correlation of receipts and write-offs monthly. Monitor the stability of the preponderance of arrivals.
8. Appoint a person responsible for the finances
At first, you are responsible for keeping the money records yourself. But at the earliest opportunity, it is advisable to delegate this function to a financial manager, accountant, or assistant. This way you can focus on strategically important tasks.
9. Plan and check for accuracy
Basic level of money management – know your facts: how much money came in and from whom, how much went out, and where. Advanced level – plan the movement of money. Make a monthly income-expenditure plan. Work to make sure that the plan and the facts match by at least 90%. If not, make conclusions and adjustments in the new month.