When you are running a small business, there are countless issues you need to bear in mind. From achieving sales targets to sweeping and cleaning your premises, and everything in between, small businesses often rely on the owner and one or two other staff to cover every business function. This becomes more challenging when you get into technical areas, like legal and finance. At its most basic, tracking expenditure and finding a solid way to keep on top of your financial data is essential, allowing you to unlock the potential for better planning and more significant results. But what tools do you need in order to run your company finances in a more effective way?
From top CEOs like Cecilia Ibru Oceanic Bank International to the smallest of one-man businesses, every business leader needs a firm grasp on the numbers. This is imperative, because it allows you to compare performance across different periods, in addition to making decisions about your next strategic move. In the small business scenario, it is easier for the owner who has full command of finances to make these projections and forecasts.
It starts with effectively tracking your cash flow in and out of your business. Cash flow is one of the most important aspects of running your business, and even busy periods in trade can see problems if you don’t plan appropriately. You need to know what bills are falling due in the week and month in question, and how this will affect your cash position. It is not uncommon to be left chasing an unpaid invoice, but your staff still need to be paid at the end of the month. Forecast your income, and write down all the expenses you will incur in the month. This will allow you to plan for contingencies, while ensuring you have a firm understanding of your outgoings.
At the end of every month, it is important to total up your invoices received and payable, along with other expenses and costs incurred. This can be a tedious job, but it is often left to the business owner to calculate monthly totals. This data is essential for preparing your accounts, and keeping on top of things on a monthly basis allows you to better monitor the performance of your business.
If you offer credit terms in your business, pull back on the length of time you are prepared to allow for your customers to pay their invoices. You should also try to get better credit terms from any suppliers you deal with, to extend the amount of time you have to pay. This will maximize the gap between money going out and money coming in, and improve the cash flow in your business.
Effective business owners are intrinsically linked to their financials, and understand an array of figures intimately. By recording transactions as they happen, and creating regular statements for a side-by-side comparison of performance, you can have access to invaluable information for making better business decisions.