In today’s world where businesses spring out on daily basis, starting a new business can be exciting yet risky. There are many complex issues you have to deal with from administrative tasks, securing customers, making sales to finance management.
A new business requires enough capital to cover up all the financial needs. Having enough finances for your business increases your chance of success. However, despite the availability of funds, the business may crumble if not properly managed.
Small businesses account for 99.3% of all private sector businesses in the UK. To survive and stay relevant requires smart decisions and ability to manage income effectively. Here are six smart tips that will help you manage your business finances properly…
- Proper management of all expenses
It is important to keep your expenses as low as possible. You can achieve this by keeping track of your income and expenses – especially in the early stages of growth. Always review your expenses to identify which sector consumes more funds. With expense-monitoring credit card technology, you can watch and control your transactions better. Plan ahead for huge expenses like rent, taxes, wages, material costs, utilities, and debts. This will reduce your financial burden and make income management better.
- Separate business account from personal account
As a small business owner and once you have registered your company, you should open a commercial account. It is not wise to make your personal and business expenses from the same account. This can hinder proper income management, and you may be forced to spend unnecessarily. If you lend to your business, keep track of it. Consider yourself an employee and pay yourself at the appropriate time. This will help you determine your proper profit margin.
- Settle all large expense promptly
Before starting a business, make sure you have enough capital to cover the major expenses. Expenses like rent and legal fees should not be allowed to accumulate. This can cause unnecessary problems for you later. Ensure you settle them as soon as you can. You may consider renting instead of buying assets in case of relocation. If you are considering expansion, plan and execute it carefully. Avoid pushing large amounts of money into a quick expansion which may lead you into debts.
- Make provision for emergency funds
Provisions should be made for emergencies in order to maintain a steady flow of income. Part of the income from months of high sales should be kept as emergency funds or reserves for expenses in months with low sales.
- Avoid unnecessary spending and debt
Unnecessary spending of money should be avoided at all cost. As a small business, when you travel for business-related purposes, go for inexpensive hotels and do not spend more than is necessary for transport. Any potential expense you can do without should be totally scrapped. The lesser debts you incur, the better for your business. Debts can also damage your credit ratings and keep you struggling to stay afloat.
- Negotiate with vendors before signing a contract
While making purchases of supplies from your suppliers, try to strike a better deal. Go for cost-effective materials. You should also examine the contract terms properly to avoid signing a contract that will lead to bankruptcy.
Establish your financial goals today and work towards it. As a small business hoping to grow and cover more grounds, income management is very important. These tips will help you manage your income and decisions better.
To read more on topics like this, check out the business category.