Business owners mainly know the basics of accounting and bookkeeping. As a businessperson, you can always get help from a professional or use special applications to help you with that. However, it’s highly important that you know the glossary and different methods that help you manage business finances. Any business- small or big, is in need of financial management to develop and become successful. This article has been written for the people who are not good at bookkeeping.
How to manage business finances
Just like any other guide, this article consists of different steps. The greatest business people all around the world have tested these tips and suggest startups that they take them seriously. Keep reading and follow these steps to be able to manage your business finances in the best way possible.
1. Educate yourself
In order to manage business finances, the first thing you need to do would be educating yourself. You need to know about some new terms and their importance. Therefore, with the help of articles.bplans.com, we have provided a small glossary for you.
Also called total revenue, your gross revenue is the sum of all monies you’ve received from customers in exchange for your product or service, before taking any deductions or expenses (such as rent, costs of goods sold, taxes, etc.).
What’s important about expenses for the purpose of business accounting is that expenses are deductible against taxable income. Common expenses are rent, salaries, advertising, travel, etc.
The operating income minus taxes and interest. The same as earnings, or net income. It’s what is left over after you deduct your expenses from your total revenue.
The cash flow in a business plan is the change in the cash balance. For example, the cash flow for a month would be a positive $10,000 if the balance was $10,000 at the beginning of the month and $20,000 at the end of the month. It is important to distinguish cash flow, which is the change in the balance, from cash or cash balance, which is the resulting ending balance.
2. Open a business bank account
Make sure that the bank account you are using for business matters is separated from your personal bank account. Mixing business money with your personal finances leads to unexplained losses. Separating them helps you keep track of your business money better.
3. Track your expenses
To manage business finances you need to keep track of all your expenses. Make sure you check your account statements. Pinpoint your money habits by taking inventory of all of your accounts, including your checking account and all credit cards you have.
Categorizing your expenses could be a good idea. Maker it a habit since you always need to know about the details of your expenses. There are also some applications that can assist you with that so consider using them in case you need professional help.
4. Cut your costs
There are mainly two types of costs for each business: fixed costs and variable costs. Paying fixed costs is inevitable. Variable costs, however, are something you can take control of.
Whenever you want to spend your money on something make sure you choose the best option available. Cut the expenses of your travels- make video conferences if possible. Also, consider bartering your services with the ones you need.
6. Hire professional help
Of course, you will need professionals to help you manage business finances. The fact that you know about the basics and you take care of some points won’t make you needless of getting help. No matter how much you pay on this most of the time getting help from a professional pays off. Some applications- such as Quickbooks online, Freshbooks and Xero, can help you manage important documents. You can also hire people who can help you with accounting.
7. Take control of your own marketing
It’s not hard to learn marketing strategies. Not only it’s pretty easy but also it can help you manage your business finances greatly. All you need to take care of is your efforts. They should be intentional and focused, plus make sure you target the right audience.