When you have a great business idea and you are ready to create your business plan, the most important part of your plan is your financial strategy. That being said, most entrepreneurs do not know a lot about finances and budgets. One of the top reasons some small businesses fail is because their funds were not managed properly because of poor planning. Let us share some tips that can help you better plan and manage your business finances.
One of the first mistakes made by many entrepreneurs is procrastinating when it comes to daily bookkeeping and putting them off for another day. The trick to ensuring that you do your bookkeeping is to make it simple for yourself – because trying get your mind around it will just make you procrastinate more. If you break down your bookkeeping into smaller, more manageable categories, the job will not look as challenging and you will be able to avoid not doing it.
Plan for more fixed expenses and know what to expect each month. Inventory and staffing costs can be flexible and may change from month to month. But knowing what fixed expenses you can plan for will help you to better organize your cash flow. One of the largest expenses that your business might face is the cost of housing it in office space. You may know how much your rent is, but what about other office expenses? One way to know exctly what your office expenses will be, is to rent office space in an all-inclusive office business centre where there are no hidden costs.
Are you focusing on your core strengths or are you trying to reinvent the wheel? Instead of looking at what core strengths your business already has, it is the impression of some small business owners that they have to create everything from scratch. This is not cost-effective. You have some tools and software that you are already using, so why not work with your vendor to find out how you can get more out of those systems. Fine tuning and learning how to get more from your existing tools could save you a great deal of money.
Don’t be afraid to ask your vendors and suppliers for new pricing or discounts. You would be surprised to see what you can get from vendors just by asking. Many suppliers to small businesses and start-ups understand that there are times when a customer needs what they are selling to them. They would rather negotiate on price or discount, than lose a customer. Suppliers understand that when things are working better for their small business customers, the amount of products or services will increase.
Overworking yourself is not healthy for your business and not profitable. When you are starting out, you will often work long hours. But you cannot maintain an 80-hour work week without affecting your health and personal relationships with people that support you . Your time is money to your business. But if you experience burnout, the health of your business and your bottom line will suffer. There are countless articles on this topic.
Learn about and understand how seasonal cash flow affects your business. Most businesses know or understand that their sales are sometimes affected by seasons. But they also should know when sales and cash flow will be lower. This is not as simple as it sounds. But a good accountant can look through your books and predict when your good and not-so-good cash flow seasons will be. It is important to keep back some cash in the good months, so that you have adequate cash in reserve for the slower months.