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Having a sound financial plan and management system at the heart of your small business can lead to a potentially profitable business year and is something that all businesses, no matter how big or small, should strive for.
Every business year starts with roughly 400,000 new and small businesses in the UK and only two-thirds of them reach it to the end. For the most part, this isn’t due to a lack of customers or poor quality of products or services but instead a lack of knowledge for managing their finances.
To succeed in such a competitive market, you need to have the basics nailed down and managing your finances is one of them, which under no circumstances should be overlooked. He is a comprehensive guide on how your small business can manage its finances in this new business year.
How To Manage Finances as a Small Business?
Cash Flow Statement and Forecast
The best way to have an idea of all of your payments in and out of the business is to create a cash flow statement every month. This way, you can assess if you are spending too much money on things if you are making enough net profit to grow and so on.
This simple financial document can help you prioritise where you want cash flow to be put and prevent overspending every month. With the rise of technology, this can take a mere fraction of the time and shouldn’t be skipped out on.
Payment Terms
When it comes to your product or service, establishing payment terms is crucial. For example, a restaurant is paid once the customer finishes their meal, while other jobs like hairdressers or plumbers expect to be paid as soon as their job is done and, in some cases, before the work even starts.
If you are a business that works with other businesses, usually a credit term is created from 7 up to 90 days. This would encourage you to be careful about who you do business with because if invoices aren’t paid, this will have a direct impact on your cash flow and could start a snowball effect if even one is left unpaid, which may lead to the need for credit insurance firms to get involved or investment fraud lawyers to retrieve these funds.
Open a Separate Bank Account
All small, limited companies are legally required to have separate business bank accounts. This can give you a full idea of what is coming in and out of the business funds. You will need to consider things such as transaction fees, withdrawal fees, introductory offers, admin features and the level of customer support that’s available.
Cloud Accounting Software
Cloud accounting software can be the perfect solution for small business owners to help manage and process all their financial data. This would be a perfect way to ensure there is no human error or inference in any internet scams that could alter the finances. Keeping a record of this can ensure no dodgy things are happening behind closed doors.
