Proper planning and organisation have seen small businesses grow to become a big break in their Shell.
This is just one pointer that tells how much difference it makes when the right tools are put in place, especially financial tools.
Finances are like the vehicle of any business, growth and progress first is calculated by how much a business or organisation has been able to convert her capital to higher revenue.
This means that every business must acquire and develop financial skills because a financial failure is a business failure.
In this article, I will share with you, ways you can manage your finance as a small business owner. So if you are a business owner looking for ways to manage the finances of your company, or your small business, this article is for you.
Financial management can be both tasking and demanding, this is because many business owners may not be abreast with the required skills. A successful business is a reflection of proper skills that are utilised to making the products and offer real services.
Financial skill is principal for any business.
With a lack of experience in managing business finance, one is sure to run into bad financial habits, thereby putting the business at the risk of folding up in the nearest future.
A business or company whose finances are properly handled will enjoy stability.
The first and principal measure to take for every business owner is to educate yourself in basic financial skills, like simple accounting tasks, bookkeeping ethics, drafting financial statements.
While educating oneself isn’t enough, the organization must be put in place, in other to avoid some ups and down every month end, certain key things should be put in place.
1. Salary ( pay yourself):
Every entrepreneur or business owner shouldn’t overlook their investment into their business, and so they are qualified to earn a salary, but why this is important, we have seen that for the most business owner, this balance isn’t there in their business, all they do is just find ease in dipping hands into the finances of their business, this character is a red flag for a business that won’t thrive or stand the test of time at all.
You want to ensure that your personal and business finances are In good feet, then like every other staff that earn from your business or company, you should be entitled to a salary. You need to compensate yourself as much as you do others, even if you don’t actively run the everyday work of the business, remember your idea and investment brought the business to the peak it’s currently occupying now.
2. Invest in growth:
Growth is fundamental in life, so whatever gives it, should be taking advantage of, while it is true that a business offers service or gives out product, thereby easing the life of its consumers, it is also vital to note that, every business needs a system that allows her to grow outside its shells.
This allows the business to thrive and able to skip off the rainy days.
Every business should have an eye for the future, so small businesses should be proactive about the future, but their finances into opportunities that have a clear and defined goal and are profitable for the business.
Some of the ways to invest In growth might be partnering with other companies, investing finances into other industries for certain defined interest rates, investing into the careers of employees, and this in time creates more value for your business.
3. Take a loan wisely:
For most small business owners, the idea or thoughts of loans is very scary, for that reason, as a business owner if you can avoid it please do, but if not, then the loan should be taken wisely, loans can so much boost the capital and revenue of a business, however, the repercussion that follows an inability to meet up the target of loans might be a complete shut down of a business or a low response to service and product delivery, this is why loans that should be taken, should be ones of friendly terms and conditions, and fair interest rates.
4. Manage Tax payments:
Paying taxes is so much normal for small businesses, it is through taxes, that the government generate revenues for running the government, however, it might be a war zone for small business owners, if not planned properly. It is best advisable to pay up taxes annually or quarterly, to maybe just have a focus that, it is off the expenses board, but indeed, most business owners don’t do well that way, as many times paying that becomes a mountain to climb. So as a business owner you can make your tax payments monthly, and that way you treat it like every other monthly expense, which will also make your financial record accurate, knowing that monthly taxes are being paid from the accumulation of monthly profit.
5. Bookkeeping ethics:
If there is one culture to imbibe as a business owner, it should be the culture of keeping records. Business owners many times do business daily with the idea of “I can keep every record in my head” or “I know we are very much in profit”. All of these subtle statements can be avoided if businesses owners pay diligent attention to keeping records. For those who keep records, ensure to take out time to review your records At Least Weekly, every business owner should go as far as getting a bookkeeper, this will save a lot of financial issues, and it gives you leverage into potential financial crime.
Take out time to look into the company’s bank statement, and invoices, a failure in this, might lead to wasteful spending or significant loss of funds.
6. Do expenditures backed with ROI:
ROI means Return on investment. While it is important for business owners to see the need to spend, it is important that 70% of the business expenditure, should increase the revenue of the business.
When expenditure and ROI are measured, it gives you a pointer of where and where not to spend on. Know where you are spending and putting in your hard-earned dollars, and if it isn’t bringing a maximum ROI, be sure to cut slacks, and invest in other significant sides that has better stakes.
7. Cut slacks
Cutting slacks is one very important side to manage a business, you mustn’t be emotional or sentimental in business. Cutting slacks will mean, don’t employ more employees when the ones you have can still do the job required, don’t increase salary pay In times where the business revenue isn’t stable or increasing, know when to drop off some staffs, probably when finances aren’t stable to pay them, a lot of business owner are liability conscious than asset conscious, this means that there are certain equipment you can afford to buy, but will keep needing the services of others, know when to replace your gadgets and not keep wasting money in repairing.
A business that learns to cut slacks, will save itself off a lot of financial crises and stay afloat.
8. Be futuristic (plan):
Business, as we know, is an everyday thing, so there will always be an everyday requirement over this shouldn’t scrap off the place of planning, especially financially.
There should be financial goals, this helps to have confined financial expenditures, either monthly or annually. “A business or business owner that isn’t looking five to ten years ahead
Is already behind the competition” said Tina Gosnold, founder of quick book specialist firm.
Types of business finance
- Debt funding
- Equity funding.
1. Debt funding:
Debt funding is a loan that when taken, the company repays with additional interest, with debt funding a business can easily access capitals that might not be achievable in weeks and months.
Bank loans, government loans, business credit cards, etc are all forms of debt funding, which must be repaid, even if the company fails or experiences downtime.
2. Equity funding:
Unlike debt funding, equity funding doesn’t demand repayment if it, not the business fails.
Notwithstanding that your funders automatically gets a seat in the decision-making panel of your company or small business, some equity funders include equity crowdfunding and venture capitalist.
The business world is a very volatile one, but if as a business owner you pay attention to all the above-mentioned points, then your small business is bound to stay afloat and make significant progress financially.