One of the most critical aspects of managing and owning a business is finance. However, only a few business owners are well-versed in handling their business’s money. Entrepreneurs are the authority in leadership, in ideation, and in strategizing, but very seldom in managing finances. A lot of them make the mistake of treating the total profit as their salary and expecting the business to keep churning out the same amount every month. This is a disastrous setup you can avoid now. Here are top business finance tips to start doing today.
You don’t have to know all the technicalities; you can hire an accounting firm for that. However, there are financial decisions that only you, as a business owner, can make. Make sure to follow these top business finance tips so you can have a financially stable enterprise.
Business Finance Tips #1: Set goals.
The vision you have for your business must be matched by a quantifiable result in the form of money. Sure, you want to be a successful entrepreneur, but how do you measure your success? A year-end profit of £300,000 is a more measurable goal you can work towards, for instance. Set a figure that matches your feelings towards what success is. Aside from it gives a clear picture of the end in mind, it can also be a guide in short-term financial decisions such as taking on a loan or cutting down costs.
Make sure that your financial goals are realistic based on your industry, the current trends, the nature of your business, and the overall economic health of the country.
Business Finance Tips #2: Do financial forecasting.
If setting financial goals is your destination, financial forecasting can help you get there. Always update yourself on the economic climate, taking into consideration important events happening around you. For instance, your financial decisions should be considerate of the global Coronavirus crisis. What can your business do now in response to it, and what steps can you take in anticipation of its economic impact?
Knowing where your business stands in terms of finances will help you make better decisions and craft effective strategies for stable growth.
Business Finance Tips #3: Set up an emergency fund.
Just like in your personal finances, it’s crucial to have an emergency fund. To determine how much it should be, calculate how much you need to pay company expenses for three to six months of zero income. You’ll never feel the need for it until you need it, so make sure you prioritize this as soon as possible. Once you have your emergency fund, you will have more confidence to take on more risky business decisions knowing that you have a deep pocket to reach into in case of failures. Moreover, there are unforeseen events such as the Coronavirus that can negatively affect your business, so an emergency fund can help you recover.
The global pandemic has prompted the government to give aid to businesses who are having a hard time. Read more about them here:
- How to claim the new micro loans – Bounce Back Loan
- How to claim the Scottish Pivotal Enterprise Resilience Fund
- How to claim the Scottish Creative or tourism and hospitality enterprises hardship fund
- How to claim the Scottish Newly Self-Employed Hardship Fund
Business Finance Tips #4: Make smart spending choices.
Especially at the beginning of a business, it’s essential to make frugal choices. Launching a business might feel like you need to splurge on branding and marketing materials, but there are always more affordable alternatives. Once the revenue starts rolling in, that’s when you can redirect some of your income to pricier, higher quality items.
However, you should spend big on investments that promote growth. For instance, training for you and your team should be considered of high value and is worth spending on. As customers see improvements reflected in your products, and customer service, it will be easier to scale your business. Your clients would gladly join the ride up instead of having to drag them along with costly, counterproductive marketing strategies.
Business Finance Tips #5: Measure ROI.
When you look at your expenses, do you simply look at the amount to determine if it is worth your money? A more effective way to evaluate costs is to determine its return on investment. If an expense can bring in more net profit, then it is worth keeping or even boosting. On the other hand, a cost that doesn’t result to profit can be eliminated.
It can be tricky to do all by yourself, so it’s important to have a huddle every so often to evaluate with your team whether or not you are still on track in your business finances.
Business Finance Tips #6: Work with an accountant.
Business finance isn’t merely looking into your bank account at the end of the month and saying, “Yep.” It’s a fundamental system that tells you how profitable your business is, and if the strategies you undertake to achieve your profits are working. Thus, you shouldn’t neglect accounting. Working with an accounting firm gives you easy access to your business finances and what they mean for you, instead of looking blankly at numbers and figures.
Aside from taxpaying and bookkeeping, an accountant can also give insightful advice based on the movement of the money in your business. The sooner you get on board with an accountant, the sooner will you have a clearer picture of your business finances.
Business Finance Tips #7: Ask for discounts.
Yes, ask for discounts. Maybe the best thing you can do for your business today is to get that laptop for the lowest price possible. There’s no harm in trying, and multiple tries will lead to lesser costs and higher net profits. Master the art of negotiation and shake off that hesitation the next time you close a deal.
Sometimes all it takes is a kind email straight to the owner. Being relational and speaking on a level that both of you can understand can make the difference between an expensive high-end office chair to the very same chair but at 20% off.
Business Finance Tips #8: Automate what you can, when you can.
The great thing about the technology of today is that it’s not expensive anymore. You can automate invoicing, payroll, and other financial activities for a cost that’s a fraction of hiring somebody to do it. Investing in efficient technology ensures correctness, ridding you of unnecessary worries.
Some systems require experts to run them. In such cases, you may consider outsourcing tasks that don’t take a whole day in the office.
Business Finance Tips #9: Scale-up carefully.
Once you feel that you can take on more growth opportunities, check yourself that you’re not carried away by excitement. Instead, look at the realities of your finances and scale according to what you can afford. Measure the risks and determine how far you are willing to take.
Have everybody on board in your plans. Keep the enthusiasm up, motivate them with measurable goals, but remind them of the budget you have set for the upscale.
Business Finance Tips #10: Separate business money from personal money.
Most small business owners make the mistake of failing to set up a separate business account from their personal account. When your money mixes with your business’s, you might end up using business money for your personal expenses, thus wasting cash that could go to profitable investments.
On the other hand, you might also end up using your personal money to keep your business running. When this happens, you might not be able to properly evaluate profitability and end up running in circles without actual profit.
As in everything, the biggest room is that for improvement. Look at your business finances today and see where you can work towards development. If you must, work with an expert for valuable analyses. You don’t have to make so much guesswork, and you can instead focus on decision-making.
If you are seeking more advice on how you can repurpose your business or more business planning so that it would snugly fit into the present world situation, Annette & Co. is here to offer you a FREE consultation 📞 . Annette Ferguson – Chartered Accountant and Certified Profit First Professional – can help you unlock financial strategies to improve the profitability of your business amidst an economic crisis.
Before you make any drastic decisions, seek out a professional’s opinion. You can also follow us on any of our social media channels