Many people think starting a venture is effortless unless they enter the business world. Whether it’s recruiting employees, overseeing daily operations, or managing finances- business owners have a handful of tasks on their shoulders. But, amongst all, staying on top of finance-related matters is the most critical. After all, you need money to operate your business, whether installing a plant or incurring an expense.
As a business owner in New Zealand, you must ensure the business has adequate funds to pay for a debt, inventory, expenses, and fixed expenditures. Not just that, it’s vital for you to manage finances effectively to eliminate the possibility of bankruptcy. So, how can you manage finances proactively? Before getting into financial forecasts, remember to track revenue, expenses, and profits.
Remember, ensuring effective financial management will keep you out of stacks of paperwork, encouraging business growth. But if you’re not a pro at managing money-related matters, continue reading to manage your finances smoothly.
Here are some tips to follow for managing business finances efficiently.
1. Don’t be afraid of loans
You might balk at taking a loan for your business, particularly if you’re in the early stages of your business. You might think about how you’ll be able to pay it back without knowing how profitable your venture will be. Don’t worry. There are many ways to take loans responsibly and safely.
But do you know how? Firstly, decide which kind of loan you want:
- Traditional term loan: This type of loan helps with startup expenses.
- A business line of credit: these lines are better for managing daily expenses.
Once you’ve determined the loan type, look for loan providers such as Nectar if you are a business owner in New Zealand. Visit their website https://nectar.co.nz for more information.
2. Have a good billing strategy
Thinking about what a billing strategy is? It involves all elements of the payment process. Additionally, an excellent billing strategy maximizes the possibility of every invoice in terms of timings and payment terms. It reduces the cost of errors with improved payment track, identifying discrepancies between payments and invoices. With a billing strategy to manage outgoing and incoming payments, your liquidity and cash flow might improve, making it essential to have an efficient billing strategy.
So, how can you create an excellent billing strategy? Besides automating the billing process, it should also be prompted by the date a task is completed, or the product is delivered. For instance, the billing process for a new-20 customer should start the same as the product is delivered. This means a statement and invoice should be made and sent electronically on that same date.
Besides that, remember to communicate early and often with your customers. As a best practice, consider reaching out thrice before an outstanding payment becomes overdue. Here’s how you can get in touch with customers after sending an invoice:
- Day of sending the bill: Send a courtesy message or email to inform the customer that you’ve sent the invoice. Ask them to verify its receipt.
- 3 Days Later: If the customer hasn’t replied to your message, send a quick follow-up to make sure they’ve seen the bill
- Invoice due date: Follow-up to see if the customer will pay on time. If they have a problem paying, you must know earlier than later so you can plan accordingly.
3. Separate business and personal finances
One of the most incredible ways to effectively manage your business’s finances is to separate business and personal finances. But how can this help you manage finances better? Separating personal and business finances can make it simpler to get a proper picture of your cash flow. After all, if you’re using your money to contribute to the startup costs of your venture, you’ll want to track those expenses precisely.
Besides that, separating business and personal finances makes it easier for you to manage your balance sheet- income vs. expenses- when you have a separate business account statement to evaluate. Having two individual accounts instead of using the same for business and personal uses makes you look more professional in establishing your business individuality.
4. Optimize your payroll process
How can optimizing your payroll process help you manage business finances more effectively? Improving your payroll practices can help you budget more efficiently. As a result, this can keep your employees happy, allowing you to grow your business. Remember, every business benefits from an optimized payroll process in banking or the fashion industry.
But how can you improve your payroll process? Consider trying these things to optimize your payroll practices:
- Use automation: Computerizing your payroll significantly decreases the odds that you’ll make a mistake anywhere along the route. The less human work there is, the better you’ll be able to deliver accurate pay stubs.
- Make an authorized payroll rule: Executing an approved payroll contract will ensure everybody is on the same side. Remember to put it in the text. This allows you to have a record that your new workers can consider if there are disputes or questions concerning payroll.
5. Make a cash flow statement
Why is it crucial to create a cash flow statement? The cash flow statement answers essential questions like ‘where did the money go’ etc. Cash flow statements provide a holistic picture of various payments businesses make that aren’t usually reflected in a profit or loss account. For example, if your business took out a loan and is paying it back, those payments might not be included in a profit and loss account.
Besides that, as cash flow statements give a detailed report on how much money a business has, they can help financial managers keep track of spending to meet short-term goals. Moreover, creating a cash flow statement allows you to access data regarding current outflows and inflows. As a result, this helps you focus on making cash from activities besides profits.
Are you finding it challenging to manage your business’s money-related matters? Don’t worry; we’re here to help. Look at the tips mentioned above and see how you can manage finances smoothly, allowing your business to thrive.