Every successful business no matter how big or small needs fantastic financial planning to succeed. Usually there are some simple steps to follow in order to manage your finances effectively. Small business owners should consider the following points when they are managing their finances:
Manage your budget
One of the best ways to run your small business is to figure out exactly how much you need to take to break even and then how much you need to run the business day to day. You need to put your budget into 4 main categories:
a) Prospective income
b) Fixed expenses
c) Variable expenses
Invest your money
Where possible you should invest and not spend. You need to spend money that you have worked hard to make on things that will benefit you in the long run. There are two types of benefits that come from spending; current and long-term. If you invest in long term items you will get the benefits for a longer time. You should always make sure that you assess the cost and benefit when spending, if it doesn’t directly help to increase business then do not do it.
You have to keep all of your records up to date and in order. All receipts should be kept in a safe place where you are able to locate them when needed. Spend at least a few minutes each day to go through your documents and make sure that none are missing.
Save where you can
Your business has two types of expenses; fixed costs and variable costs. Fixed costs are you costs that you have to live with, you need to bear their weight even if you aren’t making a profit. Where you can try to save money is by using free and open software. You can try things like getting a free online phone number that will forward to your mobile phone, have meetings via Skype so that you save on travel. Try and exchange services where possible – help another professional in return for their expertise. The main idea is to try and be as frugal as possible without letting your customer’s experience suffer.