Running a business is tough. Running a profitable business is even more so. The following will break down some of the things a business owner needs to be aware of if they want to keep their finances healthy.
Work With A Professional Bookkeeper
Bookkeeping is an integral part of managing any business. Not only does this valuable collection of organized data help you better determine business strategies and help you respond with flexibility to changing expectations and customer needs by illustrating the growth and financial outcomes after decisions are made, but L&M Associates point out it can also help keep you in good legal standing come tax season. You have a legal obligation to accurately report your business’s financial situation to the government for tax purposes. Any mistakes in this regard can be looked at as tax evasion, which is a crime the government takes incredibly seriously.
Regularly Review Your Costs
Those managing a business’s finances tend to focus a huge amount of their attention on incoming money: sales and contracts booked. While this is a vital part of keeping a business thriving, there is another half of the profit equation that is often overlooked. Reviewing your costs and looking for ways to fine-tune where money is spent can result in a much more profitable business than focusing on incoming money alone. You might be shocked to realize how much your business is spending on something that is a high-quality alternative that costs far less. Sometimes all it takes is getting a membership to a bulk or wholesale store where you can buy all the toiletries, cleaning products, paper towels, coffee, and other office supplies you need at a massive discount. It might involve changes over time, like replacing bulbs with energy-efficient options every time one runs out or looking into energy-light alternatives to appliances in the office kitchen.
Don’t Let Invoicing Slow Down
If you don’t stay on top of invoicing, there’s a chance that your understanding of how much money your business has is way off. Ideally, you want to send out invoices as soon as possible after providing goods or services. Keep payment terms down to seven days so that payments aren’t getting delayed, put off, lost, or forgotten about. Moreover, be sure to follow up on invoices sent (you can even create a template for email or text to make this step super easy for you). Finally, you’re going to want to double-check invoice numbers and cross-reference these with your payments.
Expand At A Gentle Pace
When a business is growing, it’s all too easy to get caught up in the excitement and make sweeping expansions. Steady and careful expansions that don’t cost too much upfront are always the safer option than going crazy and buying a whole new office when all you really needed to do was rearrange some furniture to fit your new team members into the space comfortably.
Keep Your Personal Money And Your Business’s Money Separate
Far too often are people mixing together their personal bank accounts and their business bank accounts into one big chaotic pile of numbers. This will make your bookkeeper’s job harder, make it trickier to avoid accidentally spending company money, and will also make getting audited a nightmare. Keep everything completely separate.
Make A Budget
Just like when you’re managing personal finances, a budget can really help keep a business on track towards its financial goals. A massive part of developing a business budget involves gaining a firm grip on your priorities as a business. This mental process will not only help you make financial decisions but all other business decisions as well, and so can also end up saving you time later on down the road.
Focus On High-Quality Clients
You maybe have heard of the Pareto principle. It is the idea that roughly 80% of consequences come from 20% of causes. When it comes to managing a business, many people find this principle holds up, and 80% of their income comes from 20% of their clients. Many business owners also find that about 80% of their problems come from 20% of their customers. Keeping this principle in mind can help you avoid renewing those contracts that are making you next to nothing financially because they’re such a hassle with so many problems that require your staff to go above and beyond and stay at work late that they’re not actually worth it.
The above tips should help you keep your business financially healthy. Of course, this is a forever ongoing process. You should be conducting your own financial audits at least every quarter to see if there are any areas ready for improvement.
