Making complete records about finances, be it cash flow, daily, weekly and monthly turnover records, as well as business purchase records are important things that need to be done.
No need to care about how small the business that you are running, prepare records well, so that if one day the business becomes large, you will not be overwhelmed in the field of business (whatever). In addition to these reasons, the actual financial recording is very necessary to measure performance and targets, whether it has been achieved or not. Many small businesses go bankrupt, when in fact it can potentially become big, only because of the problem of ineffective business financial management.
Simple Tips to Manage Small Business Finance
- Understand financial accounting
To manage bookkeeping effectively, you need to create at least 5 separate account books that record each transaction. The required account books are cash flow books that contain records of money going in and out, inventory books, books on buying and selling, accounts payable books, and books on costs and other income besides selling goods or services.
Separating business finance with personal finance
In general, the main factor in the bankruptcy of small businesses is that they do not separate business finance from personal finance. If you do this, it is not clear which money is for business, and which is money for personal needs. You can take salary from the profits of your own business for personal use. Often the small business actors do not separate their personal finances from business finances. The reason is because the business is still small, so it is considered not yet complex. Though it is a fatal mistake that can result in business failure.
Plan the use of money properly
As a businessman, you have to plan for the best use of money, especially when you have more capital than has been calculated. You should not waste money even though your business cash balance is in a position to have more than enough funds. Adjust expenditure plans with sales targets and cash receipts as well as possible. You can postpone capital expenditure plans if you don't benefit in increasing sales or reducing costs. Next, you need to do a cost and benefit analysis to ensure that the use of your money will not be in vain and can provide a profitable return or increase business profit.
Perform effective cash rounds
Don't just focus on profits, but ways to manage business finances also include how you manage debt, receivables and inventory. Many businesses have cash difficulties even though their accounting records show good numbers. Pay attention to how you rotate cash, because the cash cycle will slow down if the credit sales term is longer than the purchase, or if you have to store inventory of merchandise. You should try to make credit sales terms the same as buying credit, and you should also be able to reduce inventory levels in such a way as to keep fulfilling orders without burdening your finances.
Ensuring profit calculation
Your goal as a businessman is to make a profit. But do you know how much profit you have gained from the business? Calculating profits correctly is as important as generating profits itself, where the most crucial part in calculating profits is calculating costs. Most costs can be identified because they involve cash payments. But some others are not in cash, such as depreciation and amortization. Then some of it hasn't happened yet but needs to be reserved for future issuance, such as taxes and loan interest.
Utilizing third parties or using software
You can use employees or third parties to help keep track of your small business finances. Invest in HR, or if it's not yet possible, you can use the help of special software to manage your business finances. There are already tons of simple financial management software for small businesses on the market. The price varies according to your needs. By using the software, you can save time and work.
Those are some tips for small business financial management that I can convey. I hope that these tips are useful for me and others who read.