Money makes the world go round and your small business, of course. As challenging as it might be to start your own business, it’s even more frightening to imagine your business sinking due to bad financial management. Enter the budget plan. It can’t be emphasised enough how important it is to take care of financial matters within your small business. Poor financial management (and in some cases the complete lack thereof) is one of the biggest killers of startups. But fear not – with a comprehensive budget plan in your holster you can be ready for any financial showdown heading your way. Here are five tips that can help you to better manage your small business budget plan:
1. Knowing what you owe and what is owed to you can give you greater control over cash flow.
Not settling accounts with your creditors or falling behind on payments can have serious consequences for your business relationships, your credit score and tarnish your reputation. On the other side of the coin, follow up with the people who owe you money because without cash coming in you won’t be able to make purchases and will fall behind on the delivery of services. Be clear about your payment and delivery terms and include this on your invoice. Knowing when money is coming into the business can help you plan ahead and better manage daily cash flow.
2. Be smart when acquiring business capital and know where and why you spend money.
Unless you have won the Lotto or received a generous inheritance, chances are that you have taken out a loan to get your business up and running. Managing this loan properly is a big part of yourbudget plan. Choose carefully who you decide to loan money from. Smart loans with smart pricing plans can, overtime, deliver some much needed financial assistance in terms of the interest it accrues. Keeping track of money that comes in and out of your business makes it easy to identify where you need to put the brakes on. Make it part of your budget plan to pinpoint what you spend on every single item. If you can’t justify the purchase, you don’t need it.
3. Try to cut down on any unnecessary costs that you may have.
It’s easy to confuse wants with needs but the more blurred the line between the two becomes, the more financial woes you’ll end up dealing with. Always ensure that you are purchasing equipment and supplies that are an absolute necessity for your business. Consider renting equipment over spending one large sum of money on a single piece of equipment. Companies that lease equipment usually offer support and you can upgrade to bigger and more sophisticated models as your business grows. Think carefully before employing someone to help you with menial tasks that you just don’t have time to do yourself. Employees come with a lot of additional admin and financial management. You might find it easier and cheaper to outsource certain tasks or get someone in to help on an ad hoc basis.
4. Review your budget plan frequently to adapt to the changing environment of your business.
As your business grows and changes so too will your financial requirements. Try to reassess yourbudget plan at least every six months. You’d be surprised how much you can learn from your financial reports. Use them as a guide to trim off unnecessary spending and free up cash flow. Relooking your budget can also help you to keep track of assets. They can only be considered as assets if they continue to make you money. This is also a good time to reassess your fixed and variable costs as they do change over time. Research and price comparisons are great ways to help you get the best products and services at the best prices.
5. Make use of software that can help you to easily monitor your finances.
Taking care of your finances can be time consuming and tedious. Online accounting software can greatly minimise the effort it takes to compile and produce financial reports. Accounting software enables you to store and manage all your financial documents in one place and also access them remotely. Online accounting software assists in eliminating human error and calculation mistakes ensuring that all your financial data is accurately captured. A lot of time is wasted on worrying about how to budget correctly and just managing finances in general. The more you know and the smarter your approach to money matters in your small business is, the better equipped you are to handle them. Download our Guide to Startup Finance 101 to get some more insights into budgeting, streamlining daily operations management and the benefits of online accounting.