Best Tips for Successful Money Management for A Profitable Business

Management of finances is a vital and indispensable part of any organisation, irrespective of its size or legal form. Conflicting with a widely held opinion, financial management is not merely bookkeeping or balancing a business’s accounts; it is much more than that. Entrepreneurs need to keep a regular check on their finances for many purposes, including ensuring success in the good times to surviving during the bad times. If the finances are managed properly and effectively, the business tends to climb the ladder of success. If it is not, then it will fall at every hurdle. Given below are a few points that a business owner can adopt to manage the company’s finances in a better way.

1. Pay attention to the budget

The annual business budget should be prepared properly as it is an important step in managing the business’s finances all year round. The budget helps in making decisions ahead of time and also lays out plans for future expansion. The budget prepared shall be revised from time to time to keep a check on the income and expenditure patterns and make the process of generating revenue easier. Budgets help in setting expenses and revenue goals. If the revenue calculated is lower than the expenses, then measures can be taken to cut down the spending and increase income.

2. Keeping the business paper-free

With the help of cloud-based business tools, any business can go paperless very easily. No employee would like to go through heaps of papers and tons of balance sheets. Digital platforms can be used for organisation, and backups can be created for all important data and documents. Using invoicing tools and online accounting tools helps streamline business processes. They also ensure efficient and accurate records, which help in filing taxes properly.

3. Selecting the right investors

If proper investors are chosen for funds generation, they can turn out to be assets for the business and help in accruing more funds than those received through loans. They will help the business pass-through tough times. Thus, selecting the right kind of investors is an important task. Proper research must be done on the investors’ background to know about their most recent investments and how engaged they will be in the business heads’ decisions.

4. Maintaining a good credit score

A credit score is used to determine the creditworthiness of a business by financial institutions, partners, prospective customers, and suppliers. By looking at the credit score, they determine if the business will default in making repayments on its debts. A good credit score also helps in establishing goodwill for the business. For the organisation’s financial success, a good credit score must be maintained. A business must also look for opportunities to rectify a poor credit score.

5. Seeking the services of accounting professionals

Finances are an important part of running a business, but if those finances are not managed properly, problems will arise. Typically, business owners find it difficult to maintain the accounts themselves. Thus, hiring an accountant for bookkeeping and managing finances would be a wise choice. An expert will get the job done easily and faster without any errors.

6. Boost in savings

Having a proper savings plan acts as a great weapon in the event of a downturn. It helps in facing bad times and keeps the business afloat. While preparing the budget for the next year, the accountant must ensure that a significant part of the revenue is kept aside to cover potential business losses.

7. Managing debts

Carrying the debt burden from one financial year to another is not a feasible option for a business. The business owner’s strategy should ensure that current debts are paid off before taking any further loans. The business should make it a priority to pay outstanding payments efficiently without lagging.

8. Adopt financial forecasting

Business owners should make it a habit to study recent market trends and forecast the business’s financial position. The business plan should be evaluated from time to time, and necessary changes must be made so that the business remains profitable. This will give out a clear picture of the organisation’s current position and help in making revisions and developing better strategies that would enable business growth.

9. Protection of business against fraud

Proper cybersecurity must be installed and implemented when accepting electronic payments, leveraging technology, and setting up a business on e-commerce platforms. The anti-virus and firewall must be updated regularly to ensure that the company’s data and clients’ personal data are well protected.

10. Automation of bill payments

A business owner can’t keep track of all the payments that are due over a period. Also, making payments manually is time-consuming and requires a lot of energy and focus, which delays the primary business activities. Thus, it is better to automate bill payments. Whether making the payments by credit cards or using online banking, all payments should be automated. But timely checks must be done to ensure sufficient funds in the account. This will also free an owner from paying late fines.

11. Stock control

Proper record and maintenance of stocks help calculate the exact amount of stock that is readily available and determine the amount of capital that is tied up with debtors. Implementing proper controls over the stock will help in realising free cash flow. If proper control is maintained, the business will never be short and will never have a situation of having too much.

12. Separation of personal and business funds

If personal and business funds are mixed together, it can disorganise records and lead to overspending and missing growth opportunities. It also makes tracking the amounts withdrawn and deposited difficult.

13. Maintaining cash reserve

Even if proper money management is conducted, there might arise some situations where something unexpected happens, and the business is left with nothing to cover those expenses. Thus if a small cash reserve is maintained, it will be an added advantage for the business. The owner can open a savings account and regularly deposit a portion of their income in this account.

Also read:

1) Best Tips for Customer Retention for a Small Business
2) Tips to Understand Your Market while Starting a Small Business
3) Tips for Businesses to Overcome the Covid Blues - Revival Tips for Businesses
4) What are the keys to success when operating a small scale business?
5) OkCredit: All you need to know about OkCredit & how it works.

FAQs

Q. How to manage the cash flow in the business?

Ans. The relationship between profits and cash flow must be understood so that they both can be easily distinguished. Cash is found hidden in fixed assets, prepaid insurance, inventory and accounts receivable, and it is used for making payments for credit cards, account payables and bank loans. Thus cash flow must be calculated after realising the activities mentioned above.

Q. Why is money management important in a business?

Ans. Money management helps in determining the taxes to be paid on a timely basis. It’s an inherent skill of the owner or manager. As every decision made by the company has a financial impact; thus, the owners must keep in mind the factors before passing any resolution.

Q. Who can help with money management?

Ans. The business owner can reach out for help to financial advisors and money managers as they will provide proper guidance to handle the business’s funds. They might charge a nominal amount of fees.

Q. Does the other partner have to be involved in the money management process and preparation of budgets?

Ans. Even though it might be tempting for the individuals to carry out this whole process all by themselves, They have to involve the partner while taking decisions. If the partner is not involved while budgeting strategies are prepared and financial goals are set, the business is likely to fail. A regular check of the finances must be conducted in consultation with the partner.