Keeping a track of finances is always a thing of concern for businesses. Proper financial management is vital for surviving in a volatile economy and the cutthroat industry competition prevailing in the business world. Your company’s finances and well-being are interlinked.
By Sanjay Borad
They go hand in hand and can either support or have a negative impact on each other, if not carefully managed. In order to stay credible, every business needs a financial structure that generates a profit. Entrepreneurs need to be well equipped with good money management skills to turn their venture into a successful one.
We know that you want to know how to be adept at handling finances, here we feature 10 secret tips to help you manage your business finances successfully.
Managing finances is all about finding sources of funds at the lowest costs. The foremost thing is to educate yourself about the basics of finance. For starters, learn how to read financial statements (if you don’t already know how). This way you can keep on your money flow– where it originated from, how many hands it changed, and where it is.
Second important thing is to learn about sources of long-term finance. Knowledge about this will help you be more vigilant of financial risks and losses. Usually, an Institutional investor provides Long-term finances so entrepreneurs who wish to expand their business can plan to do so with long-term financing.
Find Professional help
A great accountant can be a fundamental part of your business, your team and the future of your business. It pays off to have the services of an expert, even if it is on a part-time basis. By using and analyzing your data, they can help you identify where your business is, where it is heading.
Be it payments of the current year or tax planning for the next financial year, their expertise can go a long way in guiding you and bringing you peace of mind. Just make sure you hire someone you trust, though.
Try zero-based budgeting
Before you go for it. Let’s throw light on what is zero-based budgeting? Rather than considering the budget history, it involves allocating funding based on necessity and efficiency. It involves preparing a budget from scratch where all the expenses must be justified for each new period. This allows for flexible budget, lower costs and more disciplined execution of finances.
With this trick, entrepreneurs will be able to trace the cash flow in their business.
Take advantage of factoring services
Factoring finance allows businesses to improve their cash flows helping business-owners manage their source of finance and putting them in a better position to cover their overall expenses. A business using factoring finance have a greater chance to grow their businesses and are more likely to have a decent level of finance for their trade and operations.
Invest in accounting soft wares
Using regular accounting software to handle your finances will never give you the kind of convenience cloud-based or advanced accounting software can. They are error-free, hassle-free and reliable. This software allows you to update, store, track, and access data from anywhere in the world. Whether you’re at home, office or are traveling, you can conveniently access your work data from anywhere you like.
Ensure successful transactions through a letter of credit
For import and export businesses, this is like a lifesaver. However, before blindly opting for it you must search what is a letter of credit.
The ultimate purpose of a Letter of credit is to ensure successful business transactions between a buyer and a seller. It guarantees payment because the bank issued it to the seller. What actually happens is that you make a pledge to pay the seller as soon as you receive goods, and the seller accepts your promise because of the involvement of the bank. There are many types of letter of credit you can opt according to your business.
Financing through debentures
This is one of the safest ways of managing your business finances. Interest payment on debentures is tax-deductible. Financing through them is less costly as compared to the cost of equity capital.
Reduce risk with derivatives
To start, understand the meaning of derivatives.
Derivatives are innovative financial instruments that aim to increase returns and reduce risk. It is considered that derivatives increase the efficiency of financial markets.
Separate Personal and Business Finances
Keep your personal and business finances separate. Get a business credit card and put all related expenses on it. This should help you track your outlays. This will also help you save a lot in your business.
Stay tight-fisted to keep your expenses in control. This, especially, holds true for small businesses. While fixed costs have to be borne, regardless of whether your business is making money or not, there is a possibility for savings in variable costs.
Now that you know the nuts and bolts of ten precise ingredients to successfully manage your sources of finances, you can seamlessly run your business.
Sanjay Borad is a financial blogger and founder of efinancemanagement.com. He is an expert in crafting excellent corporate financial posts with great content and powerful headlines. You can find him online @efinmgmt.