Finance is the backbone of every business. Therefore, it is imperative for business managers to plan, organize, direct and control every financial activity for the smooth running of operations.
According to research conducted by the U.S. Bank, 82% of the business failed due to poor cash flow management. Managing cash is the biggest trouble for business concerns, especially for startups. So, considering your cash management needs and policies, here we have listed 5 general rules to manage your cash that takes your business to next level
1. Have an Idea Before Anything Else
Making an idle investment is never a good idea. It could sink all your business profits. Therefore, whether you are investing in heavy machinery or buying furniture, always think twice. First thing is to look at your funds, then make a selection between investment types such as leasing, renting, or buying. You can also ask financial experts and get a valuable opinion because with the fast pace changing trends, some of the machines get obsolete very fast. Making investments in such assets may not be a wise decision, especially for firms that are struggling with funds.
2. Get on Top of Your Cash Flow
Cash inflow and outflow are important for the smooth running of the business. Therefore, keep an eye on every business activity which is sinking your funds. For example, if your business has outstanding electricity expenses, pay it now and be on the safe side from paying the amount with penalties. When you are lacking funds, you can arrange funds from utility loans and repay the amount with the Installment Loan regularly. Considering loan is the easiest and safest way to save your business operation hampering due to power supply cut-off.
3. Work on Your Balance Sheet
The next biggest thing in financial management is to work on your balance sheet. Look at its assets and liabilities side, these must be equal from both ends. Most importantly, you must have contingency funds for the safe future and to pay certain liabilities in case the business is bearing loss or working on Break-Even Point. Keep in mind, if you found an unstable balance sheet, do not hesitate to go with loans and funding.
4. Separate Your Personal and Business Expenses
The biggest mistake most business owners do is when they are unable to separate their personal and business expenses. Therefore, they keep on paying lifestyle expenses from their business credit cards. Which is the biggest blunder. On the other hand, some business managers forgot to pay their salaries, again, it’s a mistake. Your every activity whether for business or personal reflects your financial statements and helps in paying for taxes.
5. Spend Some Time for Monitoring Activities
Having some time to check business activities is one of the most important steps. Even if you are too busy, still spare some time to check financial records. It helps you to know loopholes and factors affecting your investments. If you do not have a specific set of skills, you can also hire a specialist for auditing.
Hope the above information helps your business to reach new heights of success. Just remember, make an investment after evaluating every aspect, find factors affecting cash flow, work on the balance sheet, separate your personal and business account. Most importantly, have some time to check business activities, either weekly or monthly.