By : Andy Raybuck
Starting and running your dream business is a herculean task. You are required to dedicate immense amount of time and hard work. But the constant factor that haunts you is the business finance side. It can be difficult for you to manage your business expenses if you do not have a regular source of revenue where you can expect to receive monthly collections. To ensure that your company does not waste money and resources, you must budget your company finances with the help of some strategic planning.
In order to manage your business finances in a better way, here are six basic points you need to consider on money management :
1. Acquire basic knowledge and learn finance : Being efficient in managing your personal checkbooks is not enough for business management. You need to be more knowledgeable on business finance and management. It is advisable to learn some basic finance and accounting in order to keep accurate records and understand financial reports. You must also explore some techniques on how to reduce your operating expenses.
2. Prepare a realistic cash flow budget : With a cash flow budget, you can effortlessly pay off your business expenses and manage your revenue with ease. When you plan and project your cash flow, you can manage your business expenses proactively. In preparing your cash flow, you need to include your sales or revenue forecast, expected cash receipts like accounts receivable and expected cash disbursements like cost of sales, operating expenses and loan repayments. Make sure you constantly review your cash flow budget and modify it from time to time.
3. Pin down the important areas affected by the cash flows : It is also important to mark the important areas affected by the cash flows like price, volume and overheads. These points have great impact on your cash flow and it can be difficult for you to change it. At the same time, the competitive market may prevent you from increasing the prices. In certain cases, the cash flow is influenced by inventory turn-over days as well as account receivable turn-over days of your business.
4. Review the credit lines extended to your customers : This is one of the important ways to improve and manage your accounts receivable. You should be able to establish effective credit policies for managing your cash flow successfully. It will be beneficial to your business if you can strategically plan how to encourage your clients to pay more quickly. You may offer discounts for early payments or charge interest on accounts that are pending and overdue Imposing interest and late payment charges may accelerate collections of your accounts receivables and improve your cash flow.
5. Reduce redundant expenses : Reducing expenses is one of the important points in money management techniques. Learn to find ways to reduce expenses without compromising the quality of your services. One simple tip is to ensure you cut expenses on unnecessary business promotions as you can smartly promote your website online without spending a penny.
6. Set aside an emergency fund : In running your business, you are required to calculate your revenue and expenses for a covered period so you can assess your net profit. Your cash flow budget would also indicate whether you will have extra cash or deficit in a given period. From your extra cash, it is best that you set aside stipulated amount for emergency fund. You can use this fund if your revenues are not generated at the right time or if your projected collections are not realized.
You can practice effective money management by keeping the above mentioned points in mind. Proper planning and budgeting of your finances will help you avoid accumulating your business debt in the future.
This article was written by Andy Raybuck. He is a financial writer who has expertise in dealing with financial issues. He tries to impart to readers simple solutions to get out of difficult situations by contributing financial write-ups to internet websites. His blogs aim to help people and businesses who are struggling with financial worries. If you like the article, you may join the facebook community where he is associated with.