Effective finance management is a crucial element for running a prosperous business. For a small-scale business, effective financial management becomes even more necessary and demanding as a business grows.
With a limited budget and manpower, small businesses significantly rely on carefully outlined financial management.
Undoubtedly, effective financial management of a company’s day to day operation plays a vital role in a company’s success. However, there are still many other ways that you can help manage your business finances smartly.
Business owners can now follow simple yet important ways to make their business more successful. If you want your company to reach its objectives you need to be in control of your company’s finances.
When it comes to running a small business, money is always the main concern. You need your business to have an income right?
By modifying your business operations and processes in a few simple ways, you can give your business a boost. Day-to-day management is vital for the well-being of a business.
For new entrepreneurs and all businessmen who own small businesses, the following are 5 smart ways through which finances can be managed without any hassle.
1. Think of Each Month as a Mini Year
With the commencement of every fiscal year, financial goals are set for the upcoming 12 months. It is important to create a framework based on S.M.A.R.T goals. The acronym means Specific, Measurable, Attainable, Realistic and Time-sensitive.
Despite having one annual goal, one can still manage to attain all set targets by splitting up the effort into 12 months. A task fragmented into portions can hence be made accomplishable as compared to that of trying to complete it in one go.
By the time you reach the end of the month, make all your calculations exactly the way you do by year-end. While treating every month like a mini year, make it a practice of going through all finances on a regular basis.
2. Try Cloud Accounting
Cloud-based accounting can be your backup for small businesses that fail to keep track of their finances. It is advanced software that allows individuals to keep track of in-depth details of business finance. Also, this facility is accessible anywhere, anytime and from any device.
Cloud accounting helps prevent the possibility of error occurrences from specific finance inputs. Consequently, it is ensured that your debit and credit cards being used are in sync.
Some of the commonly used cloud-based software include Wave Accounting, Xero, Outright, Kashoo and QuickBooks.
3. Categorize your Business and Personal Finances
While you are planning the future of your business you will need to keep track of all small and large business expenditures. In order to quantify and rationalize your business health and finances, personal and business finances should be carefully categorized and monitored.
Create a separate account and have your credit card and checkbook entirely dedicated to your business finances. This will facilitate smooth auditing of much of your business in goings and outgoings. Keeping track of all costs can be carried out more effectively along with smoother auditing for taxes when the year culminates.
The better the understanding you develop regarding finances and cash flow, the easier it gets to make decisions.
4. Seek Help from a Financial Pro
Hiring a Chief Financial Officer (CFO) or some other financial professional/accountant provides assistance in managing small business finances.
A financial professional uses proficient ways to check business finances and to determine how output shall be maximized while minimizing deductions.
Businessmen are highly recommended to hire professionals who have dealt with financial management in the past. An experienced professional has greater knowledge as to how business cash flow should be tracked.
An experienced finance professional knows what advice is the best to give and when. The advice covers areas of concern such as tax returns, audits, cash flow and other things.
5. Documentation System
Having to manage receipts and important documents without a documentation system is likely to mess up your paperwork. Therefore, you can maintain a manual paper filing system by adding in each piece of paper relevant to your business.
Fintech research firm CB in a study found that a company’s productivity could be increased by 21% by improving document management within an organisation.
In 2017 document management systems had a market share of 3.59 billion USD, this is expected to increase to 6.78 billion in 2023.
Dedicated files, folders, and cabinets are examples of well-managed documentation systems. On the other hand, technologically advanced methods have taken over paper documentation. Computer files replace all the paperwork that occupies space in cabinets.
Documents can now be easily replicated via computer files which have a backup on the cloud. Hubdoc.com, Google Docs, and Dropbox are cloud-based file management systems for quick backup. Privacy and safety of files is also ensured.