It’s exhilarating to start a business, especially when you’re burning with ideas focusing on your field of interest.
However, some aspects of business management are a rather complex experience and not always fun. Naturally, business finances are one of them.
As a business owner, you have to keep yourself from plummeting into a financial disaster, and that entails learning a few skills and strategies to help you in keeping your business afloat. Even basic aspects like creating financial statements and simple accounting go a long way in managing your accounts more effectively.
There are also some practices and habits that every business owner should bear in mind to keep their accounts in top shape. Read on for some tips for managing your accounts more efficiently as a business.
Separate Personal And Business Funds
Do you already have a separate account for business? If not yet, then that’s the first thing that you should focus on. While it’s true that it isn’t necessarily required to separate personal and business funds, doing so is crucial to managing your finances. Add to this the importance of bank statements in tracking portability, and most especially in reconciling your books. Here’s an article on bank reconciliation to help you understand how essential such a process is to businesses.
Mixing your business and personal finances can only result in disorganized records, which leads to not only overspending but also missed growth opportunities. Tracking of deposited and withdrawn funds also becomes difficult when you combine finances. This makes it challenging for you to monitor outgoing and incoming money.
If your personal and business funds are in the same account, you are also prone to dip in your personal funds for business expenses or vice versa.
Monitor The Spending Of Your Business
Do you have an idea of how much money your business spends each day, week, or month? Monitoring your business-related spending is essential, so you don’t rack up bills that you actually don’t need. Also, if you fail to track the spending of your business, there’s a higher chance that you will overspend and misuse funds.
Business owners often have multiple accounts, such as a credit card account, savings account, and checking account. Make sure to record the amount you spend or withdraw from each of these accounts, as that way you can stay on top of your account balances.
You know how easy it is to utilize your business checks, debit card, or credit card to cover small expenses. A new coffee machine here, a little lunch treat for your staff there. These small expenses add up. That’s why it’s important to keep an eye on your business-related spending. By doing so, you remain prepared for any bill that comes your way.
As you monitor spending, don’t forget to factor in those uncashed checks. When writing one, the recipient isn’t required to cash the check right away. If you don’t monitor spending, you’ll end up with overdraft fees and an overdrawn account.
You can track your expenses by merely managing all your accounting books. Make use of simple software to record transactions. It will be easier to monitor spending if you have an accurate log of all your expenses.
Stay On Top Of Your Business-Related Bills Deadline
If you don’t have an idea of when your business bills are due, such as credit card payments, business loan payments, or accounts payable, you might end up not having enough cash on hand. Also, not knowing when bills are due will result in added interest or late fees, not to mention lowering your business credit, as well as damaging vendor and lender relationships.
Stay on top of bills deadlines to avoid those missed bill payments. Record all payment dues and set reminders for you not to fall behind. You can pencil in the due dates on your phone, computer calendar, or even on a paper and set yourself a consistent payment schedule.
Remember The Accounts Receivable
If your business is offering credit to your customers, you would know well that you might not be able to receive payment for products and services until the scheduled due date or beyond. It’s easy to forget about these accounts receivable after one week or month. However, if you want to continue better managing your finances, you must always remember all the funds owed to your business and pursue payments.
For you to easily remember accounts receivable, you can record everything in your books. Try creating a summary of accounts receivable to help you track the receivable total. The summary of accounts receivable should show you which particular customers still owe your business some money, the amount due, the customers who are already past their due dates, and the total receivables.
It’s essential to track receivables for you to smartly manage business finances, but it’s even more important to receive payments. It would be best to send out invoices and late notices to those customers who haven’t settled the amount they owe yet to help you in pursuing payments. Some business owners also offer early payment discounts, especially if they need the money earlier than the scheduled payment date.
Does your business order too much inventory, only for it to collect dust in the storage room? Or, maybe you regularly run out of in-demand stocks, pushing your customers away? You can solve these problems by improving your inventory management. Adequately managing and staying on top of your inventory also helps in managing the accounts of your business.
To avoid crossing the line between not having enough and having too much, track how much business inventory you have. Record all inventory purchases and sales, and always remember to monitor how much is left in your stock before ordering more.
The better you understand the finances and cash flow of your business, the more efficient you become in managing your accounts. It, of course, prepares you for making smart decisions. The tips above can get you started, but please keep in mind that nothing replaces being hands-on and proactive in managing your business finances, no matter how small or big your business is. It’s the most effective way for you to learn how to manage your accounts in the best ways possible.