Financial management tips to keep your business afloat

Running a business is challenging, but keeping it profitable can be really daunting. Contrary to what most people think, money management is a lot harder than it seems, and it’s not just limited to accounting.

You probably know that as a business owner, financial management is at the forefront of company growth. However, there may be times when you don’t track your financial information properly or miss out on tax deductions, and that’s totally fine. Since your primary focus is taking your business to the next level, you undoubtedly have a lot of work to do. And understandably, managing your finances can become a burden if you don’t have an accounting education.

That’s one of the reasons companies could lose money without their owners even realizing it. But don’t get discouraged. There are many ways to manage your business finances and grow your business.

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Here’s why businesses could be losing money:

As previously mentioned, entrepreneurs can lose money due to the myriad of day-to-day tasks that come with running a business. But that aside, there are several reasons why money can slip through your fingers:

  • Poorly Trained Employees: Training is the key to a well-prepared, motivated team. If your employees are not properly trained, it can directly affect your ongoing business. You should know that when a business owner invests in a rigorous coach for their team, they don’t see it as a cost, they see it as an investment, and you should do the same. A poorly trained staff is unproductive and unmotivated, resulting in a half-finished job. Sometimes it’s not the workers’ fault for your financial losses – since they’re not fully qualified for a particular job, they look for shortcuts to get it done, and in some cases they don’t finish it at all.
  • Improper use of technology: Technology makes it possible to automate your tasks. But what if it’s not used properly? Sure, you might think that investing in the latest technology will increase productivity and efficiency in business operations, but that’s not always the case. Make sure you only use devices and tools that fit your needs. So think carefully about what you need and buy the appropriate technology.
  • Spend a few pounds on marketing: In this modern age, image is key, so if you’re not running a marketing campaign yet, it’s time to do so. Online marketing is a powerful tool in today’s digital world since the internet has become part of everyone’s life. So don’t hesitate to invest in an advertising campaign – it will undoubtedly attract customers and increase profits.

Create a budget that reflects your business goals

Setting a budget is of paramount importance when it comes to running a business. Not only does it help you manage your purchases, but it can also lead to savings. By sticking to a budget, you can rationalize what you can and can’t afford. Also, you’ll be more realistic about your business growth strategies in case you encounter financial problems along the way. A business owner is likely to have money problems, especially if they don’t know how to make a business budget. If you’re in the same situation, you should update the budget plan every month, take a look at industry standards, and always allow for some wiggle room. Don’t forget to have a cash reserve because let’s face it, the unexpected can happen – additional surprise costs and unforeseen expenses are part of any business.

Consider using accounting software

If you’re still using manual accounting to keep track of your finances, it’s time to rethink your approach. Whether you run a large business or a small one, financial management is inevitable. The flow of data in your organization can overwhelm you, and as your business grows, you’ll need to prove even more information. Also, payroll administration can be a burden, especially if you run a business with a significant number of employees. All that with the addition of bills, legal payments and transactions – sounds intimidating, doesn’t it?

Thanks to advances in technology, you can now manage your finances without much hassle and expense. accounting software can help you run both business operations and payroll. Plus, it’s a budget-friendly choice — you can save money by taking out an annual subscription to accounting software, which often comes with a significant discount.

You can also spend valuable time managing taxes. This is not only time consuming, but also scary. Now more than ever you should store your financial data in a digital format and not lose your mind every time the tax period approaches. You can use Make taxes digital (MTD) to submit Value Added Tax (VAT) to Her Majesty’s Revenue and Customs Authority (HMRC) and to do so effectively.

Separate private and business funds

If you tend to mix your business and personal funds, it is time to change this habit as it will only lead to financial loss. When both individual and corporate finances are combined in a single bank account, you may lose track and start spending money on personal needs from funds dedicated to the company. Start small and consider opening a business bank account, but not before you’ve applied for an Employer Identification Number (EIN) – even if you run this business, you also need to get paid. Once you have the EIN, you can get a business credit card and pay yourself a salary. Remember that you need to keep track of all expenses, be they personal or financial, so consider separating and keeping your receipts.

Think about accounts receivable

When you take out a loan, it’s easy to forget these funds. After a few weeks, you may not remember that customers owe you business money, which is one of the reasons companies lose money. Consider making a note of the customers who are in debt and the amount they owe you to adequately capture the receivables. It might seem trivial, but tracking your tracked payments is crucial.

If some customers are behind on their payments, you can send them invoices and reminders to make sure you get your money back.

Apart from that, financial management is essential in any business, big or small. Luckily, there are different ways to keep track of your finances and the above are just the most popular ones. Financial management tips to keep your business afloat

Fry Electronics Team

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