If you are running a business and you want to make sure it has a good chance of keeping strong, one of the main things you’ll want to think about is how to look after the company’s finances as effectively as possible. The truth is that there are a lot of ways in which you can do this, and it’s going to be mostly a case of making sure you have the right kinds of processes in place. In this post, we’ll discuss how you can look after your company’s finances much more effectively from the outset.
Get Clear On Cash Flow
You can think of cash flow as the lifeblood of your business, and as long as you are keeping it solid you are going to find that helps a great deal. Essentially, if you don’t have cash to spend when you need to, then you are in trouble, because you can’t keep things moving, and that means you cannot continue to make more money either. So you’ll need to set up some regular cash flow forecasts, either weekly or at least monthly, to track inflows and outflows closely. If you can spot any shortfalls early, you are going to find it gives you much more time to react rather than panic, so that is going to be hugely important to consider.
Keep Your Books Updated
Accounting is not just for the end of the fiscal year: it’s also for any time that you need to make sure you are keeping on top of things, and that is pretty much an all-year round thing. So you should make sure that you are keeping your books updated as much as possible if you want to keep your business safe and moving in the right direction. If you have decent real-time bookkeeping, you are going to find that you are better equipped to make good decisions day after day. Whether you use cloud accounting software or you simply hire a bookkeeper, make sure that your records reflect what’s actually happening in your business.
Control Costs With Care
You will obviously benefit from being able to keep your costs relatively low. But if you are keen to run your business effectively, you can also do this carefully, and essentially you need to make sure you are not cutting any corners. It might be tempting to cut costs across the board, but in truth not all expenses are equal, and you’ll need to consider carefully what the ROI is of various costs that you have. First off, take a look at managing company expenses such as your main overheads, and seeing if you can reduce any of those without causing disruption to your services. Then you can think about renegotiating some supplier contracts, switching software subscriptions or moving to a more affordable office space. Those are the kinds of things that can be worthwhile and safe to do.
Learn More About Your Financial Reports
All of this is obviously going to be even easier to do if you know more about your financial reports. You don’t have to be an accountant to do this, but you should know how to read a profit and loss statement, along with a balance sheet and a cash flow report. If you don’t, then you might be in trouble, and you might find it harder to run your business effectively. These documents are useful tools for seeing what’s working in your business and what isn’t, so it’s a good idea to make sure that you are aware of that. If you don’t understand something, ask questions or take a short course. Having the right kind of financial literacy will really pay dividends in the end.
Keep It Separate
This should be an absolute rule: if you want to make sure that your company’s finances are safe and secure, you should always aim to keep them separate from your own personal finances. This is important regardless of the size of the business, and it’s something that you are going to need to make sure you are thinking about from the start. If you are mixing personal and business finances, you are going to be having a much messier time of it when it comes to taxes and in terms of trying to see how your company is really performing. Open a dedicated business bank account and use it for everything related to the business. If you are taking money out, do so properly - pay yourself a salary or draw - but don’t treat the business like an ATM.
Plan For The Future
It’s important to have a budget in place at all times. This is much more than just a spreadsheet - it’s a strategy for building and scaling your business too. You’ll need to have some strong financial goals in place, for the quarter as well as the year, so you can plan your spending accordingly and essentially ensure that you are going to be able to manage any unexpected costs. If you are considering expansion, buying equipment, or hiring staff, make sure you model how these things are going to affect your cash flow as well as your profit margins. That way, you can be sure that it is definitely a good idea before you actually start to put it into place. That can save you a lot of trouble.
Get Professional Advice
It’s hugely important to make use of the advice of professionals who really know what they’re talking about. If you have an accountant or a financial advisor by your side, you’re going to find that you are much more likely to succeed, and certainly more able to avoid big mistakes. Schedule regular check-ins, and make sure that you are doing these before big decisions too. That way, you are much more likely to have a good financial model in place.
Those are just some of the things that you should think about when it comes to looking after your company’s finances more effectively.
