Money management is not something that is not taught in school and usually learned through experience.
Wouldn’t you have loved to have had a class in grade school on how to manage your money? I know I would have avoided countless pitfalls in both my personal and business finance.
And luckily for you, you won’t have to make the same mistakes, I’m going to unveil the secrets to being financially smart with your business, show
Just like keeping your body physically strong and mind mentally agile, you also want your financial numbers to make you as much money as possible.
There are Two Main Types of Financial Neglect:
1. Fully neglecting to track expenses and income by failing to enter data into a bookkeeping system.
2. Doing a decent job of keeping your accounting up to date but failing to use these numbers to answer questions about your business’s financial situation.
Financial Management Basics
The secret to financial management is establishing a system from the start to help you stay organised. Start simple as long as you act according to your system.
1. Keeping an organized record of income and expenses
This means keeping all expenses, a good idea would be to have them all in one form. Personally I would scan all the paper invoices and receipts and keep digital copies to save space and trees. With a cloud system you can then access this information anywhere so you can easily check your numbers anyplace anytime.
2. Logging this Information into Accounting Software
So now you’ve got all your records of expenses and income organised all digitally filed, but what do you do with it now?
On some sort of regular basis transfer this information into your accounting software system. This depends on how productive your business is, busy cafe’s should do it daily where as a consulting firm can go weekly or even bi-weekly.
I would highly recommend investing in a software such as Freshbooks or Quickbooks rather than setting up your own Excel sheet because you will need to…
3. Generate Financial Reports
Unless you’ve got a degree in accounting or a thorough knowledge of micro economics, your best bet is to let the software do the work.
Your software will generate reports such as cash flow projection and profit/loss reports which will help you reveal how your business is doing.
If you are like me, you are probably wondering why you would want these reports when you could be working on new products or marketing campaigns.
Why Does This Help You Maximize Profits and Make More Money?
Just like marketing, these reports are another tool to make you more money. They allow you to see patterns and trends in your company’s finances and will help you identify profitable opportunities. Here are a few ways that analyzing your financial reports will help your business make more money:
- You’ll pay less taxes just by tracking all your expenses and you can save more money by timing your purchases.
- You’ll be able to manage your business’s cash flow, ensure that you enough money for payroll, taxes and other essential expenses.
- You’ll be able to price you product or service more competitively, pace your growth more effectively, and cut costs strategically.
You don’t need to become a financial guru overnight, all you need to do is be disciplined with your system. If you are not sure how to read and understand your reports thats okay! Set up a monthly or bi weekly meeting with an experienced accountant and listen carefully, maybe even record and listen again at home.
The more you familiarize yourself with the reports the wiser you’ll be in making financial decisions and the your business will make more money.