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Finding the best way to manage the money in our business is sometimes a bit complicated. Most of the time people think that they should be experts in everything related to business, such as accounting, legislation, finance, administration, human resources, among others.

It would be very difficult to be an expert in all these areas and for one person to do all the work. But it is necessary and convenient to have basic notions in all the subjects that concern your business, and so you can know at least the necessary terms that will help you manage your business in a correct way, trying to avoid as many errors as possible.

For our benefit, today you can get online any information that is necessary, so that you as entrepreneurs can be guided and get the best techniques to manage the money of your business.

How we can manage the money of a small business

Having a business with excellent financial stability is the dream of every entrepreneur and even ordinary citizen. With such an unpredictable economy, it is increasingly difficult to plan expenditures and save enough to make investments or accumulate wealth, especially for small businesses just starting out.

The liquidity of your business allows you to run smoothly. If you want your business to start with everything, you need to take control of managing your business money.

Establish a good cash budget

A good cash flow budget ensures easier management of all your expenses in a pro-active manner, as well as your income. In order to be able to do it correctly you will need:

  • Sales forecasts and any other income.
  • Receipts and estimated cash relationships, such as accounts payable.
  • Estimated cash outflows, such as the cost of goods sold, debt payments, and operating expenses of your business.

It is important that you can keep your budget up to date and show plans and all possible variations for your business.

See how sensitive your cash flow is

They need to focus on what has the greatest impact on their cash flow, such as prices, volumes or general expenses.

The cost of what you sell will obviously have a significant impact on your cash flow, but it is something you cannot change. Aggressive competition can sometimes keep prices from rising.

Other points that influence and affect your cash flow are accounts receivable turnover and response times.

Control your fixed costs

The fixed costs of our business are those that are paid month by month, such as: rent, electricity, internet and production costs among others. It is advisable to include the taxes paid during the year in this list. This as a way to control and monitor your fixed expenses each month.

There are different ways to carry out this control, a very simple way to do it is by carrying a spreadsheet in Google Drive or Excel, so you can have these documents backed up. This tool will facilitate the calculations as it performs them itself.

Study credit policies for your customers.

There are several ways you can help them manage their accounts receivable. Establishing effective credit policies will be an important aspect to the success of your administration.

Another option may be to find a way for your customers to pay their commitments more quickly. But how could they? Giving your customers a cash discount may be a good option. Collect interest on unpaid invoices when due, among others.

While it’s important to be careful how much you put in for interest, this can certainly become an income for your business. But, if they don’t do it in a reasonable way, these late payments could become uncollectible accounts. And that’s not what we want, and it would affect our cash flow and working capital.

Keep your debts and accounts payable up to date

Be aware of checking the schedule of your accounts payable, this way you will be able to keep a better control and follow up of all your payment commitments without falling behind in any of them.

A very simple way to do this is to make a chronologically ordered list, where you can easily observe the amount of what you owe, the due date of each commitment and the names of the providers or services. In this way it is easier to avoid any delay in pending payments, thus avoiding the collection of interest, fines or cuts in services.

If you already have a credit or some type of financing in the name of your business, or of yourselves, take into consideration, if possible, to pay fees in advance to reduce the time of the same, and of course the amount of interest.

But, be careful not to place yourself in a delicate financial situation to pay off your debts more quickly. Ideally, you should only use the extra money that does not affect your cash flow to bring forward your payment dates.

Reduce costs

This point is unquestionable, you should look for ways to reduce expenses, is an important point to take into account in managing money in your business. How to look for a way to reduce expenses without compromising the quality of your business?

Promotional costs, such as printing and reproduction, can be reduced. If production volume increases, they can hire part-time or temporary staff, instead of using additional full-time staff or even taking on some extra responsibilities. Work with what you need and avoid sudden expenses.

Try to avoid borrowing

Credit is a dangerous financial movement for small and medium-sized enterprises as it usually represents a long-term commitment with a high interest rate. It’s not always something you can avoid, but whenever you need to apply for a loan for your business, choose what’s best for you.

The ideal credit your business needs will usually depend on what type of business you have, the conditions surrounding it, the business plan you will use, and the types of credit at the time.

An example for better understanding: Term credit is perfect for investing in long-term capital purchases. Lines of credit are ideal for working capital, this is short term or for small or opportunity investments.

Separate your personal expenses from your business expenses

This advice is valid for those who already have a business or for those who wish to create one. Many medium and micro entrepreneurs find it difficult to separate personal expenses from business expenses. This can lead to some losses and even the bankruptcy of your business.

Keeping these expenses together is a bad idea, as you will not be able to tell if your business generates enough income. The lack of liquidity of your business and capital will not allow you to generate new investments.

Establish a salary for yourselves

Whether you have another job or depend only on your business is advisable to establish a monthly salary according to the income of your company, should not take all the profits for your salary, but something that is appropriate. Ideally, it should be a fixed amount per month, according to the work they do.

In this way they will not be tempted to take the money from their business for personal or family expenses, since they will only be able to receive their salary and will have a control of all the money that enters and leaves the company.

Use financial management tools.

Today there are financial applications and software that will make your job easier. If you are not in a position to acquire these tools, you can use a spreadsheet, it is a simple process.

Some of these tools give you the option to download your credit card and bank statements, track their movement and even the possibility of placing payment reminders. In this way they have better control of everything that goes in and out, and of their accounts.