No business owner likes to have cashflow problems. Unfortunately, this is one of the major issues small businesses face. In fact, 61% of small business owners face cashflow challenges at one time or another, especially in the early days of their business.
If you’re having trouble managing your small business funds, check out the money management tips in this article.
Start Budgeting
If you have a business plan, you should also have a budget. The budget is a guideline that you can use to fill any gaps in your cash management system.
A budget makes it easy to track expenses and income, allocate funds to required expense accounts, and most importantly, to monitor your savings. Without creating a business budget and sticking to it, you are running a business blindly, which is effectively a high financial risk.
That is why it is so essential for you to sit down and make a plan to keep your business from getting too far into the red column of the balance sheet.
Do Not Mix Business and Personal Accounts
There are so many reasons not to mix up a business and personal account, including personal liability issues, tax and a cluttered book of accounts.
Even in difficult situations, resist the temptation to shore up the company’s finances with personal funds or vice versa, because it will certainly lead to a mess that you will have to deal with later.
The best way to keep a transparent distribution of expenses is to set up a business current account, separate from your personal bank accounts.
Keep this strict and separate so that your company’s finances are not used for personal finances and vice versa.
Keep an Eye on your Expenses
As a small or medium business owner, opening up a new line of credit is easy when you need to make a purchase to support your business. And although this is not necessarily a bad thing, it can be very easy to get overwhelmed and run into deep debt if you don’t track all your expenses.
To prevent this from happening, every time an expense occurs, make sure it’s recorded somewhere. The best cash flow software can help you with this. Even if your purchase is for £10, it’s still important to track it.
If you track all your expenses, you have a better view of your company’s finances, and you will avoid overspending.
Negotiate with Suppliers
It is always better to negotiate with suppliers and ask for a good bargain before signing any contract.
Effective negotiators know before they negotiate what they want to achieve during negotiations. Check purchase conditions such as late payment penalties and grace periods and see if you can get a better deal elsewhere or when you negotiate further.
Sometimes you save more than 5% if you have an extra 30 days longer to make the needed payments.
Remember Account Receivables
As a small business, chances are you will offer credit facilities to your customers. Still, you should also remember that you may not get the money for goods or services sold until they are due or longer and sometimes, it’s easy to forget you are being owed, especially when it is a small amount.
However, if you want to manage your money better, you must remember about the funds due to the company and take steps to collect them when due.
Record accounts receivable in your books to help you remember them. A list of accounts receivable shows you the customers owing your business money, the amount due, the due dates and the total receivables you should be getting.
It’s a difficult task to approach cash flow challenges, but if you ignore them, then you are likely putting your business at risk. With the advice from this article, you might find it easier now to improve the cash flow of your business.
