How to Manage Your Own Finances as a Business Owner
Finances are important to any business, no matter their size or what industry they are in. Correctly managing your finances means paying your staff correctly, meeting all compliance and regulatory requirements, and – perhaps most importantly – enabling your business to grow.
Managing finance can be a challenge for many businesses, though, especially SMEs that lack the resources to hire large in-house teams or outsource their financial obligations to a third party.
There are ways you can make managing your finance a more simple process, though. Follow these simple tips and you will be more likely to succeed and avoid any penalties or expenses that can come from costly errors.
Access Payroll and HR Software
One of the biggest challenges for many business owners is having enough hours in the day. This is especially challenging for smaller businesses that do not have the headcount to carry out complex payroll and human resources functions. Owners should not be left to spend hours every day managing these functions, which is why cloud-based software like i3Group cloud payroll and HR can really make a difference.
Since the computations are done by a computer instead of a human, cloud-based HR payroll software helps eliminate errors. After a one-time configuration, it will always work perfectly.
Employee records can be difficult to keep. In such complex and lengthy tasks, human errors are inevitable, but the cloud payroll system is highly efficient. A cloud payroll system can also be integrated with other apps or software to avoid duplicate work or records. This kind of integration will help you cut operating costs as well as save time.
And when it comes to human resources, modern software solutions like i3Group cloud payroll and HR enable small businesses to carry out their own functions without the need to employ HR professionals or outsource these functions. If you use cloud software to handle all the significant HR administrative responsibilities, you will have plenty of time and resources left over to focus on adding more value to your organization.
Make Sure Your Billing Strategy Is Effective
Each business owner has at least one customer who consistently fails to pay their invoices in a timely fashion.
According to a recent study of 150,000 small Australian businesses, 53 percent of all invoices were paid late by 23 days on average. An additional 20 percent was paid for an incorrect amount, and another 20 percent was paid to a completely incorrect business.
To make sure your business is operating at a healthy level, managing your small business finances also means managing cash flow. It might be time to get creative with how you bill certain customers or clients if you’re having trouble collecting from them.
Cash stuck in unpaid invoices can create problems with cash flow, one of the reasons businesses fail. Try a different approach, instead of badgering chronically late-paying customers with repeated invoices and calls. As the old saying goes, you can catch more flies with honey than vinegar. Offer them incentives for paying their invoices early and you might see changes in their payment behavior.
Budget and Manage Cash Flow
In order for your business to remain financially healthy, you must manage your cash flow well.
Make sure that you calculate your overhead rate by looking at your direct and indirect expenses, as well as your fixed, variable, and semi-variable costs. Review your business reports, and determine how your sales and operating margins relate to your business and financial operations.
Business banking can help you manage business funds and cash flow by taking advantage of a variety of financial services and tools. Consider your purchase, liability, credit, and interest requirements when evaluating the use of a debit or credit card for your business.
Financing helps you grow your business. You could consider a business line of credit or a business credit card as a short-term financing option. In order to finance large projects or business needs – like renovations, equipment, or a new marketing campaign – a business loan may be best.
Be Very Careful Who You Do Business With
Your small business must be selective about who it works with and credit check all new prospects before accepting their business. The decision to refuse a credit check for a new contract is certainly not an easy one to make. It requires resoluteness but it could potentially be the best thing you can do for your business.
Imagine what your cash flow would be like if you were to spend a month fulfilling an order for only one customer, and the customer refused to pay. You could file a lawsuit to recover the debt, but that would be costly and time-consuming. If you cannot buy new stock, pay your bills or pay your employees’ wages, how will you survive?