Gen Tips: 9 ways to be on top of your finances.
Updated: May 6, 2019
Here are some tips for you to keep your business finances in order.
Do you find managing your business finances a pain? Though every business owner agrees that managing cash flow is extremely important, less than 20% of all business owners we’ve met actually do it well. Although it may be often tedious, managing your finances, gives you a clear picture of your business performance at any time and allows you to make clear headed business decisions.
So how then do you stay on top without the hassle of bogging yourself down?
Don’t try to do it alone. Leverage the talent and tools readily available for you. Here are 9 GenTips to help you keep your business finances in order.
1. Proper Records
Good record keeping not solely for fulfilling regulations or legal requirements. It is also about understanding your business, now, and in the future. Below are some principles to keep in mind about record keeping.
Materials from Genesis 101 class: Proper Record Keeping. The class is free for all who incorporate with Genesis Consulting and Solutions. So do drop us a message if you’re interested.
2. Budget wisely
A budget is not about how every cent is spent, rather a framework that helps you and many business owners make clear headed decisions. Some decisions include: Does it make sense to spend more on marketing, or can I pay my employees more without going broke?
How? Income – list down all ways you are receiving money. Receivables, rent income, investments… Whatever that comes in
Expenses – similarly, list down all the money going out. Bills, marketing costs, insurance, fees, mortgage/rental expense…
If you are able to understand your financial position every month, you are then able to tweak things to match what you want and need for your company/life. A good budget can help you to manage control of how you spend your money and be aware of it.
3. Use technology
When it comes to accounting software, there are many options out there, such as Xero, Quickbooks, MYOB. But the best accounting software depends on your business and it is worth considering different options before making a decision.
If you haven’t moved your financial data to the cloud yet, it should be your first order of business. Not only will it help you keep an eye on your finances, it also give you real time information and allows access anytime, anywhere.
Check out our article about cloud accounting here.
4. Cash flow
Remember, profit is not the same as cash flow. Cash flow problems happens when your payables are due before your receivables, thus, tying your money up.
Speed up cash conversion – the sooner you collect cash, the quicker you can use it to increase profits. Perhaps you may want to consider creating a good collection process so that you can keep track of all your receivables.
Make it easier for customers to pay. Instead of having only 1 payment mode, provide a number of them and make it seamless. Cloud accounting softwares like Xero can do just that for you. At the click of a button it automates the process for you and your customers.
Maintain good relationships with suppliers and buyers. Don’t be afraid to ask for discounts, even if you don’t manage to get one, suppliers may grant you key insights to your industry. Understanding your buyers is also important to know their cash flow status, so you can be aware of those who can’t pay you promptly.
5. Avoid additional charges
Often, business owners may incur some unforeseen additional charges that comes from places such as bank charges for overdraft or fees for late payment. Sometimes, Bank Charges may be useful for covering short term cash overflow shortfalls. For some, going into overdraft may be a way of life. Although it may seem little on its own, these charges really add up over the years. Our Advice is, simply spend within your means as much as possible.
Again, understanding your cash flow is key, that way you can adjust your costs and expenses accordingly.
6. Don’t forget to get paid
You would be shocked to know how many business owners don’t properly track invoices or customer payments. If you’re not keeping proper records that you can make sense of at a glance, it could be months before you discover your outstanding invoices, or worse, missing them altogether.
Make sure to monitor closely all your invoices and have a proper system in place to track them. It is also good to investigate generally how long do customers take to pay and which customers you’ve had difficulty in collecting invoices.
7. Monitor and Measure performance
Numbers will remain as numbers if there is no intentional studying of it. There is valuable insight to be found by looking through your finances. Think of what performance indicators best measure growth and track a healthy performance (e.g. the debtors ageing analysis), convert them into meaningful reports and keep looking at it in comparison to past financial statements to project future revenue, expenses and cash flow.
8. Call in a pro
Most people aren’t numbers people, and will never be as passionate about them as accountants or bookkeepers are. Although it comes as a cost, think about it as an investment to not only saves time, but all the hassle of going through your numbers. You don’t want to realise that you’ve done everything wrong at the end of the year when the taxes and financial statements are due; Errors that would cost you even more to rectify!
A good accountant may also give you valuable insight about your numbers and link you up with the right people should you need it. If you are struggling to manage your numbers, it’s time to look into hiring a qualified professional accountant, so that you can focus on your wildly important goals.
They say that time is more valuable than money. What are the top 5 things you wish you had more time for? And in contrast what are the top 5 that you wish you spend less on? Is there any way you could do without those?
Perhaps outsourcing services can be a good way to ease your business burdens. Not only does it free up time for you to focus on what you do best, they are the right people for the right job.
Check out our other article about outsourcing here.