Tips for Managing Small Business Finance – Lately a lot of people have decided to set up a small-scale business or business. Unfortunately, many businesses fail. What is the cause?
The success of a business or business is largely determined by how you manage it. If managed properly, the business runs smoothly. On the other hand, the business will be in chaos if it is poorly managed. Before you dive right in, it’s a good idea to strengthen your understanding of business theory, especially about how to manage finances.
Here are tips for managing small and medium business finances that you must understand before starting a business.
Tips for Managing Small Business Finance
Here’s how to manage or manage the finances of a small trading business and manage the money from selling merchandise which is called an important factor for success.
1. Self Education
Self-education is the first thing you do when managing business finances. The way to educate yourself can be by learning how to read financial statements.
For those of you who don’t know, basically financial statements have 4 parts, namely:
- Cash flow statement
- Earnings report
- Balance Sheet
- Capital report
By learning to read financial statements at least you can conclude the steps that will be taken for the development of your business.
2. Do the Planning
Planning in general or general needs to be done before you start a business. Prepare the big picture and the initial steps you will take in pioneering MSMEs.
Once the grand plan is made, divide it into several parts. For example, daily, weekly and monthly plans. In this way, business development becomes more structured.
You also have to be detailed in making plans. Starting from what things will be done, the needs needed, and the capital that must be prepared.
3. Create a Financial Logbook
Finances in business should always be recorded. Its purpose is to monitor all incoming and outgoing transactions. Record keeping also reduces the risk of improper spending.
No matter how small the scale of a business you run, at least provide a cash book. This cash book is used to record incoming and outgoing money accompanied by evidence.
Financial records are not only limited to cash in and out. You can’t ignore debts and receivables. Because this concerns the assets or assets of the company that you are starting.
Notes in the financial record book must be made in detail and orderly so that they are easier to read and understand. Sort by transaction date and time.
4. Make a Budget Regularly
Not only recording finances, making a budget or budgeting is also important in a business. Budgeting aims to limit spending so as not to swell.
It is recommended that you make a budget on a regular basis, for example every month or every week. Separate expenses by group. Make sure all the needs in the business can be met. Making a regular budget can also increase efficiency in a business.
In determining the budget, you should also consider the notes on the cash book. So you can know which budget to increase or decrease. Because the making of this budget cannot be separated from one period to the next or previous period. Everything must be sustainable so that the business can run smoothly.
5. Monitor Financial Cash Flow
The next tip for managing small business finances is to always keep an eye on financial cash flow. The purpose of this supervision is to prevent cash leakage.
It is not easy to monitor cash flow because it requires high accuracy. Basic accounting knowledge is also needed so that you can understand good financial cash.
6. Turn Cash Flow Faster
Good business financial management is also reflected in how you manage accounts payable well. Turn your cash flow, many entrepreneurs have difficulty turning their cash flow, why is debt management related to cash flow turnover?
The cash flow cycle will also slow down if the credit sales period is longer than the credit purchase. Therefore balancing the two is very necessary.
7. Use Profits to Grow Your Business
A business is said to be successful if you get a large profit. Instead of just spending it on personal needs, you should set aside the profit to grow your business.
From every profit earned for one month, set aside a minimum of 10% to be added to business capital. In this way, the business you are starting can continue to grow. For example, you have a grocery store business. In each month, set aside profits to buy more and more variety of items.
8. Separate Personal Money and Business Money
No matter how small the business you run, you should separate the money used for business with personal money. The purpose of this separation is to prevent business capital from being used for personal purposes.
The worst thing when you keep combining business money with personal money is that the capital runs out unnoticed. This situation will make your business forced to go out of business.
Use a different place between personal money and business cash. You can separate them in two different wallets. It’s also a good idea to create a separate account specifically for your business.
9. Prepare an Emergency Fund
We will never know what will happen to our business in the future. The worst things can happen. For example, natural disasters or revenue continues to decline due to the emergence of competitors.
Things like this can put your business in an insecure position. You need to set up a reserve or emergency fund to anticipate difficult times. This emergency fund should be prepared from the start before you start a business. You should also use these funds wisely.
Do not use it in situations that are still under control. If you experience a loss, then these funds can be used. Whereas in normal and stable circumstances, you can assume that this emergency fund is an advantage that you get from business.
Those are some tips tips for managing small business finance and manage the money from selling merchandise which is called an important factor for success. Hopefully useful!