As any business grows, its needs and nature will both change. It doesn’t matter what your intentions are when you first found your business, at some point cold and brutal market forces are going to direct your evolution. If you don’t have a firm grip on your finances as your business grows, you will quickly find them running away from you. Below are some simple tips for ensuring that your business’s financial situation remains firmly in your grip throughout its development.
Avoid Expensive Credit
It is often said that in business, you need to spend money to make money. While there is a lot of truth to this, you should avoid taking on unsustainable levels of debt. When your business does require additional funding, do not just jump on the first opportunity that comes your way. Instead, take some time to assess your options and ensure that you pursue the funding route that is best suited to your individual circumstances.
As your business grows, you should make paying off any debts that you do have on your books a priority. For as long as those debts are hanging around your neck, you won’t be able to turn a true profit from anything that you do. It is especially important that you are able to resist the urge to grab an offer with both hands just because it is in front of you, irrespective of the obligations that come with it.
Before you take on any debt to your business, no matter how large or small, you should have a clear plan for paying it off. If you cannot already see a clear way to being able to repay the debt on time and in full, you should avoid it as an unnecessary risk. Defaulting on your debts can have some very serious long-term consequences for your business; this is something that you need to avoid at all costs.
Record And Monitor Expenses
Every business has expenses. You’re never going to be able to eliminate these entirely. However, you can take the steps necessary to ensure that any expenses you are paying for are worth the cost and continue to be a justifiable expense for your business. Needless to say, you should be aiming to keep your expenses as low as possible, as they will ultimately affect your bottom line and the amount of income that you can claim as profit.
Many businesses find it helpful to plan their expenses as far in advance as is possible. If you begin the year with all of your suppliers and other vendors already in place, you can calculate your expected expenses for the year. However, do not be afraid to move to a different supplier if you think that it will land you a better deal. Anything that you can do to minimise your expenses bill will benefit your business in the long run.
Keep Your Business And Personal Finances Separate
No matter how big or small your business is, you should try as hard as you can to keep your personal and business finances separate from one another. One of the first things you should do after registering a business name is to register a separate bank account. If there is an overlap between both your personal and professional finances, it is inevitable that you will run into problems. It becomes very difficult to properly manage your business finances if you are constantly propping the business up with your own personal cash.
Similarly, lots of entrepreneurs have made the sometimes fatal mistake of taking out a loan for their business against their own names and personal assets. If you ever borrow money to be used in your business, it is imperative that you do not take it in the form of a personal loan.
Keeping both your business and personal finances separate will also make things much easier on you when the end of the year rolls around and it is time for you to do your taxes.
Conduct Regular Audits
Regular audits are essential for any business that wants to stay on top of its own health. Without regular audits to give you a clear picture of your business’s current financial situation, you will only ever be able to guess as to what is going on. No matter how fast you might think your end-of-day procedures are, and however fool-proof you think your current accounting policies are unless you are willing to strip everything back and conduct a proper audit, you can never be certain of your figures.
Obviously, as your business grows, it will become more difficult to conduct regular audits. The larger a business is, the longer and more difficult the audit process is. However, if you have people on your staff who are able to undertake an audit for you then this can save you a significant amount of time, money, and stress.
If you don’t currently have anyone on your staff who is knowledgeable enough to undertake an audit, consider whether audit training might be worth the investment. Findcourses has courses available on a variety of different subject, including audit training. You can find more details here, or you can use their website to search for more specific courses if you desire.
Make Sure You Are Insured
Your insurance costs are one of those expenditures that are unavoidable but are ultimately necessary. It can be frustrating knowing that you are making insurance payments after many months or even years of never having to make a claim. However, anyone who has had to make a claim against their insurance because of an unforeseen event will tell you that it is much better to have insurance in place than it is to have to shoulder the costs yourself.
When you compare the costs of paying for your insurance every month against the potential costs of having to deal with issues without an insurer on your side, the costs of paying for insurance are negligible and more than worth it.
That’s not to say that you shouldn’t be looking for the best deal possible on your insurance. On the contrary, you should never be afraid to shop around and see if there is a better deal available for you elsewhere.
Any inefficiencies that exist in your business represent lost time and, therefore, lost profits. If you want to nurture healthy finances for your business, then you need to actively work to eliminate any inefficiencies that exist. Identifying inefficiencies is sometimes easy, for example, when your front line workers are able to highlight problems and solutions for you. However, some inefficiencies are buried deep within complicated and intertwined workflows and are much more difficult to identify.
As well as auditing your business finances now and then, you should also audit your work processes. These workflow audits will alert you to any inefficiencies that exist and enable you to gain a holistic view of how the different components of your business operate together.
Managing a business’s finances is easier said than done, especially as it begins to grow bigger. However, if you are able to get on top of your finances from the very beginning and know how to refine your approach as your business grows, there is no reason why you cannot nurture healthy finances with minimal effort. The businesses is that really struggle in this regard are those that have been playing fast and loose with their finances from the very beginning. Make sure that you implement the advice above, and you cannot go too far wrong.
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