Money Management Tips for People Who Hate Money Management
If you’re the typical small business owner, you began your business with an exciting idea, a passion. No one goes into business thinking, “I can’t wait to work on cash flow challenges.” And yet, cash flow is one of the top reasons businesses close their doors. It’s not that they aren’t making money. It’s that managing it is not everyone’s skill set.
Money management challenges are one of the most critical areas you need to master to be successful.
This article is here to provide general information. Consult a financial planner or tax professional for more long-term solutions.
5 Money Management Tips for Better Business
Here are some of the key issues and ways to address them:Cash Flow Management
Many small businesses struggle with maintaining consistent cash flow. This can lead to difficulty paying bills, making payroll, or investing in growth opportunities.You might have the money promised to you on paper, but not knowing when it will come in can be a challenge. Businesses at every level can be impacted by this so it takes consistent monitoring.
To improve cash flow:
- Create detailed cash flow forecasts and monitor them regularly.
- Encourage timely customer payments by offering incentives or implementing stricter payment terms. Enforce those terms and send out reminder invoices.
- Negotiate favorable payment terms with suppliers.
- Maintain a cash reserve for unexpected expenses or slow periods. According to a JPMorgan study of 597,000 small businesses, 25% held a reserve covering fewer than 13 days of expenses if other revenue dried up.
Budgeting and Expense Tracking
Small businesses often lack robust budgeting practices and struggle to track expenses effectively. If this feels like you, consider:- Creating a detailed, realistic budget and review it regularly.
- Using accounting software (or an app) to automate expense tracking and generate accurate reports.
- Separating personal and business finances to avoid confusion. Your accountant will appreciate it.
- Assessing finances and adjusting budgets regularly as needed.
Debt Management
Taking on too much debt or mismanaging existing debt can be detrimental to small businesses. COVID brought on unparalleled times. One thing we learned from it is that you must be prepared for the known challenges and the unknown ones.To manage debt more effectively:
- Be cautious about taking on unnecessary debt