Financial management is the key to growing your company, scaling your operations, and surviving a tough economic climate. If you do not have a firm grasp of your cashflow, nor understand how to expertly invest your money, it will be difficult to enjoy longevity in your chosen industry.
Improve Your Financial Know-How
As a business owner, it is your responsibility to learn more about different aspects of your finances,. This will prevent your organization from accruing debt. For example, you should learn how to read a financial statement, which will feature four key details:
- A cashflow statement (e.g. activities, investments and in/out flow)
- Income statement (The revenue earned during a time period)
- Balance sheet (such as the company’s assets and liabilities)
- Statement of shareholders’ equity (details the amount the company is financed by shares)
It is important to understand a financial statement, as it will state where your money originated from, who has received your money, and the amount you have available at present.
You also must understand key business terms, such as:
- Accounts payable and receivable
- Gross revenue
- Net profit
- Fixed assets
Routinely Cut Costs
It doesn’t matter if you are running the most popular brand in an industry, you must remain tight-fisted when it comes to your company’s finances. The smaller your business outgoings, the greater your profit margin will be each year.
It is, therefore, important to routinely review both your fixed and variable expenses, so you can quickly reduce your overheads. For example, it might be cheaper to outsource tasks over hiring inhouse personnel, or you could invest in Zoom video conferencing software to reduce the need for business trips, which can help your company to save money on flights, hotels, and travel expenses.
Choose the Right Loan
There might come a day when your business will need to apply for a small or big loan, as it could help you to pay an unexpected bill or fund important equipment. However, it is imperative to carefully choose a loan. Which can prevent you from working with an unscrupulous company or selecting the wrong interest rate. For example, it is never a good idea to apply for loans with no credit check, as it is likely the company is operating illegally and you will have no legal protection.
It’s also important to remmeber that your personal credit history can determine your company’s ability to qualify for credit. Even if your business has a superb rating, a lender will review your individual credit score to identify your ability to repay the sum on time and in full.
Hire an Experienced Accountant
If financial management isn’t your forte, you should hire an experienced accountant to manage your company’s money. Not only can they help to balance your organization’s books, but they can provide advice on the different ways to maximize your company’s cash flow and will ensure you pay your tax bill on schedule.