Top Tips To Manage Your Small Business Finances

Top Tips To Manage Your Small Business Finances

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If you ask any owner of the 5.5 million small businesses in the UK today about success, they will likely tell you that it demands passion, drive, and dedication. These factors undoubtedly matter but don’t paint the whole picture. Establishing and running a vibrant company also depends heavily on sound financial management. Luckily, there are many things you can do to manage your small business finances successfully. Below are some top tips worth remembering to manage your company’s finances.

  1. Monitor your books

Monitoring your books seems obvious, but you will be surprised how many businesses skimp on this. Therefore, set time aside to review and monitor your books, even if you have hired a bookkeeper. This will help you become more familiar with your business finances. It will also open your eyes to wasteful spending, embezzlement, and even possible financial crime. However, hiring accountants to monitor your books in addition to your bookkeeper’s effort will ensure accuracy.

  1. Keep great business credit

It isn’t uncommon for entrepreneurs to want to purchase additional real estate, purchase more equipment, and expand their companies in various ways. However, you need to take out a lot of loans to pursue all these endeavours. Indeed, getting approved for loans can be more challenging and almost impossible with poor business credit. You can keep great business credit by repaying all your debt funding quickly. For instance, never let your business credit cards run a balance for over a few weeks. Also, don’t borrow any loans with high-interest rates if you can’t afford them. Instead, only go in for loans that you can easily repay to avoid carrying any business debts. 

  1. Understand cash flow

It is no secret that knowing where your cash goes is an essential aspect of financial management. A study showed that up to 82% of failed businesses trace their collapse to cash flow issues, especially during this COVID-19 period. You can stay on top of your cash flow through a Cash Flow Statement (CFS), so keep this in mind. A cash flow statement breaks down cash movement in and out of an enterprise. This statement covers a defined period and accounts for the cash spent and what it was spent on. A cash flow statement helps your company avoid overspending and avoidable bank account overdrafts. Fortunately, you can easily find cash flow worksheets online to create these statements, just like a business budget. 

  1. Have a great billing strategy

Entrepreneurs often have clients that are always late on their invoices and payments. However, you need the cash to ensure your business operates well daily. Therefore, finding more creative and better ways to bill them is advisable. For instance, instead of bothering them with many invoices and phone calls, change your payment terms. You can simply promise customers a 2% discount on their bill if they pay within 10 days. If not, the full payment will be due in a month. Many late-paying customers will likely take advantage of the opportunity to save money this way, ensuring that you always receive payment on time.

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