Start this year with a bang and plan with these great money management tips.
What is ‘financial management? It is the process of handling your business’s finances through setting goals, budgeting, tracking expenses, income, and investing.
Failing to manage your money wisely, can lead to problems such as having a negative cash flow, making late payments, and everything else that follows that.
Money management tips:
1. Work out a budget
Your budget should lay out the expenses you need to operate your business. Your budget also estimates the amount of revenue your business will receive. If your revenue is lower than budgeted, you can take action and find ways to increase income and decrease spending.
Best free budgeting tools
- Best free spreadsheet for anyone: Google Sheets.
- Best overall free smartphone app: Mint.
- Best free smartphone app for beginners: Goodbudget.
- Best free smartphone app for investors: Personal Capital.
- Best free desktop software for small business owners: GnuCash.
2. Make payments on time
Failing to know when your bills are due, can cause you to pay late fees and lower your credit score on your business account. Set reminders when payments are due, use free resources like making notes on your calendar, or schedule a task for yourself on your Outlook calendar
3. Monitor spending
Do you know what your expenses are per day, week, or month? Failing to monitor your expenses can lead to misuse of funds and overspending.
Use tools or software to manage your spending like these 8 free finance software choices.
Make sure you know how much you are withdrawing from each of your business accounts and ensure you know how much you are spending on the small things like some stationary here, pizzas for the staff there and always keep track of the amounts still outstanding from customer accounts.
If you don’t monitor your expenses you could end up overdrawing your account or paying overdraft costs.
4. Separate business and personal accounts
Never use your business funds for personal funds. This results in disorganised records which leads to overspending and makes it difficult to monitor income and expenses.
When your business and personal accounts are not separate, you can easily dip into your business funds for personal expenses and the other way around.
5. See where you can cut costs and increase revenue
Analyse your expenses by looking at where you are currently spending the most of your revenue and don’t forget to add up all those small expenses as they do tend to add up.
Increase your revenue by offering discounts, promoting products, and running social media ads. Get help from an expert if you find that you are not able to manage the marketing aspect side of things.
6. Have enough cash flow / cash reserve
This is also where money management comes into play. If you know and manage your expenses, you will always have enough cash flow. Having a cash reserve will always come in handy to cover emergency expenses.
Having a card machine helps to ensure you have a steady cash flow on hand. You also never know when a customer decides to have their bank do a reversal on their order and you will need to have funds available in such a case. Also, make sure that your merchant service provider is prepared to fight with you should a false reversal request be issued by your customer and always have a signed copy of the slip or delivery note for large orders.
7. Manage inventory
Do you over-order inventory and then have it sit on the shelf collecting dust? Or do you constantly run out of goods that are on-demand, causing customers to turn away?
Inventory management is very important in successfully managing your cash flow and small business.
We recommend using a Point of sale system to manage your inventory and the good ones will send you low stock warnings when your stock is running out.
8. Card payments VS cash
When banking your money, you may find that the cash deposit fee actually works out more expensive than the transaction fee charged on a card machine. It’s not only more convenient and safer to not walk around with a lot of cash, but it can also be safer to not to carry that much cash on you and not banking the physical money can actually save you money.
If you are in a more rural area, you can actually use a card machine to your advantage if you are able to carry more cash safely. Transform your card machine into an ATM by offering cashback/cash withdrawal on a WAPPoint card machine so that people don’t have to go to the bank which is far from their location, they can just draw money from you for a small handling fee or request them to purchase an item from your shop in order to withdraw cash.