Properly managing your money is one of the most fundamental aspects of running any sort of business. Even if you hire a professional to deal with financial matters for you, you still need to have a good overview of the monetary aspects of your company.
If you don’t keep a close eye on the cashflow in and out of your business, you could end up going under before you achieve anything that you want to. Here are just a few of the basics involved in good business money management.
Finance Your Business
There are various methods out there involved in properly financing your business. To start off with, you could look at doing it yourself or maybe you can get the support of friends and family.
Otherwise, you could explore the various business loan options out there, but you may need to get your own financial situation under control with debt consolidation loans. Other common choices involve enlisting the help of an angel investor or crowdsourcing the funds that you are looking for.
Open Up a Bank Account
One of the first things that you need to do after registering your business is set up a business account. Ideally, you want to keep this separate from your personal account so that there is a clear division involved in what you are doing.
This way, it will be much easier to keep track of the cashflow of your business. Every bank will have an individual business account, so it worth checking out the pros and cons of each and every one of them.
Manage Your Bookkeeping (Or Have Someone Else Do It)
When it comes to your business finances, you can either take care of everything yourself or else have someone else do it. Perhaps you will combine the two techniques by keeping your own books while also hiring an accountant to deal with your taxes at the end of each financial year.
There are plenty of accountancy programs out there which can make your job much easier. These will give you control of all the basics including creating invoices, tracking bank account balances, and keeping track of accounts payable and receivable.
Provide Multiple Payment Methods
When customers are trying to give you their money, you need to make their lives as straightforward as possible. Try to accept as many payment methods as possible including cash, debit card, credit card and electronic cash methods such as PayPal.
Of course, there are costs involved – but this is what doing business in the modern age is all about. Again, research and compare all the different options available to you until you settle on the provider who meets your needs at the best price.
Establish Payment Terms
Even the smallest of businesses need to establish a payment-terms policy. As much as possible, you will want to standardise the ways in which you get paid. But as well as this, you will also need to meet the individual needs of your clients.
Your payment terms should include things like covering deposits and extending credit. Before you offer a product or service to your clients, you need to clearly set out these terms so that everyone is quite literally on the same page.
Securing Deposits from Your Clients
When you run a business that is built around the services that you provide to your clients, you need to get into a routine of getting a deposit from them before any work is done.
When you issue out an order form or contract, you need to have the deposit information clearly displayed – even if you will only be supplying labour. Once you get a deposit, you have the peace of mind that at the very least, your costs are covered by your clients.
Extending a Line of Credit
In the vast majority of situations, you will not need to extend a line of credit out to your clients. However, if you run a company that is in the business-to-business sales area, you may choose to offer out some credit to your clients.
Obviously, there is a natural advantage to your business if you get paid as quickly as possible, and you can achieve this by offering a discount to clients who always pay on time.
If you plan on extending a large amount of credit to any sort of customer, you need to run a background credit check on them. Use one of the major credit-reporting agencies to ensure that you get an accurate report.
No matter what provisions you put in place, sometimes, you are simply going to have to act as a debt collector to collect the funds that you are owed by clients. To start off with, you need to keep the lines of communication open with your non-paying client.
There are plenty of ways of doing this including phone calls, letters, emails, and personal visits. In extreme situations, you may even need to enlist the help of a collection agency.
Your last resort will involve bringing the delinquent client into small claims court. If you run a small business, you may need to represent yourself as this lawyer fees will be too great to cover yourself.
Good money management is one of the fundamentals of running a successful business. Without it, you will never be able to enjoy the level of success that you are looking to achieve. When you are first planning to launch your business, look into all the financing options that are available to you closely.
Make it as easy as possible for your clients to pay you, and chase the ones who are avoiding payment. Secure deposits to ensure that your basic costs are covered and collect your debt, as without it, you can never hope to run a successful company. Over time, you will start to develop and refine financial practices that work well for your business.