There are many reasons why businesses fail, but poor financial management is often top of the list. You may have a fantastic idea, great marketing and amazing employees, but if you do not keep control of your organization’s incomings and outgoings, then things can turn sour very quickly.
Fortunately, you do not need to have a degree in accountancy to be able to manage your finances effectively. In fact, recent technological developments have made it easier than ever. So, if you’re worried about the future of your business, here are some financial tips to put your mind at ease.
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The first step to financial security is coming up with a plan. In order to achieve this, start by noting down some of the most basic monetary facts and figures relating to your company. What are your projected incomings and outgoings for the financial year, for example, and what are your growth projections over the next few years?
Coming up with a plan also means budgeting effectively. So, as well as gaining visibility into your finances over a year-long period, break this down further into a month-by-month budget, so you can track your cash-flow more easily. If you do not want to set up a business budget yourself, there are a huge number of software packages and mobile apps that you can use to get you started.
Do Your Homework
Although modern software tools will help you to manage your finances, that doesn’t mean that they will do all the work for you. To secure your company’s finances, you will have to put in a fair deal of hard work and this means brushing up on your financial knowledge. Make sure you know how to read financial statements and train yourself to check them carefully – an extra zero may be easy to miss, but it could make life difficult for your business.
If you feel like you could benefit from some extra financial knowledge then there are ways that you can improve your skills. Online courses are available in all areas of business finance and there are also university resources that are worth exploring if you are interested in the broader economic principles that underpin companies everywhere.
Have Someone to Mentor You
When you start your own business you may attempt to take on everything by yourself, unsure whether you can trust others to help with something that is so important to you. Finances, in particular, can inspire this kind of attitude, as they are of a sensitive nature and may not be something you feel comfortable sharing. However, asking for help could prove very useful, especially if you are just starting out as a business.
A financial mentor could include a more experienced business owner or a professional financial consultant, depending on the level of support you are interested in. It doesn’t matter where you find help and support, as long as they are trustworthy and have the best interests of your business at heart.
Use the Right Software
There are a wide range of software packages available to the modern business that will help you with financial management. You’ll find tools for all aspects of finance, including cash-flow management, budgeting, invoicing, and stock management. Many of these software packages will be free and others will be offered via a cloud subscription payment scheme, enabling businesses of all sizes to benefit.
There are also mobile applications which may prove particularly useful for business owners with hectic schedules. Being able to manage your finances on the move is a great way of ensuring you don’t keep putting off that financial review.
Invest in Automation
Automation can help your finances in two distinct ways. Firstly, by using automation as part of your company’s financial management, you reduce the number of human errors. Instead of manually entering data into spreadsheets and budgeting software, an automated validation process ensures that everything is in order.
Secondly, introducing automation more generally into your business will help you to reduce your overheads. By cutting back on the amount of employees you need to carry out manual tasks, you can focus your hiring efforts on talented individuals that will bring creativity to your firm instead.
Also, products from Dataserv promise automation that suits your precise business needs. Instead of an off-the-shelf piece of software, these cloud-based automation tools are highly customizable, meaning you receive a financial solution that is unique to your organization.
Separate Business and Personal
If you are new to the world of business, it is likely that the only financial experience you have is managing your personal bank accounts. Although you may think that incorporating your new business finances into your personal affairs would make things simpler to manage, this is unlikely to be the case in reality.
It is likely that you will need to know precise figures for your business accounts, for tax purposes, investment meetings and many other situations. As such, keeping your business and personal accounts separate is always a good idea. That way, you can get a clear insight into how your company is managing, without being distracted by your weekly shopping expenditure.
Capex Versus Opex
As a business, there are two main types of expenditure: capex and opex. The former refers to capital expenditure and includes the outright purchase of physical assets, while the latter represents ongoing fees, such as subscriptions. It is important to be aware of this distinction, as although opex can be less financially prohibitive than capex, it can work out more expensive in the long-term. Bear this in mind when tallying your costs, particularly where subscription cloud services are concerned.
Keep Your Eye on the Prize
Perhaps the surest way to stay on top of your business finances is by making sure you check them regularly. Get into the habit of carrying out a monthly (or even weekly) review of your company’s financial health, talking it over with any other high-ranking colleagues. By facing up to your financial reality, you’ll quickly identify any potential problems before they start driving your business towards bankruptcy.