Confused about how to manage your business finances? No need to worry, KoinWorks will share several methods that can be applied to your business.
To be said to be healthy, a business requires good financial management. For example, a balanced amount of income and expenses.
Apart from that, business owners must also understand the importance of managing cash flow and how to keep it running smoothly.
So, so that you are better at managing business finances, let’s find out several ways to manage business finances!
- 1 Determining Business Allocations
- 2 Negotiation Before Signing the Contract
- 3 Reduce Debt Risk
- 4 Planning Business Development
- 5 Make Financial Bookkeeping
- 6 Create an Annual Evaluation
- 7 Determine the Time Period
- 8 Create an Income Plan
- 9 Separate personal assets from company assets
- 10 Manage Cash Flow
- 11 Understand Accounting
- 12 Prioritize Company Needs
- 13 Set aside business income for development
- 14 Prepare an Emergency Fund
- 15 Pay Bills on Time
Determining Business Allocations
Business allocation is the first thing that needs to be done in managing finances. For example, what percentage is allocated for business operations, cash reserves, and business development allocations.
This will make it much easier for you to manage your finances and keep your cash flow smooth.
Negotiation Before Signing the Contract
The negotiation in question is when your business will make a purchase from a vendor or contract with a supplier.
The goal is so that you can get the best offer so that you save more and maintain business stability.
However, don’t forget to check the purchase conditions, such as fines and grace periods when making your decision too.
Reduce Debt Risk
The third way to manage business finances is to reduce debt risk.
In fact, it’s okay to develop a business by taking on debt. However, you need to be careful with debt.
Because the burden of debt installments in poor financial conditions can worsen business conditions.
So, if it’s not really necessary, resist the urge to go into debt.
Planning Business Development
Getting the maximum profit is one of the goals of someone setting up a business.
However, that doesn’t mean you can just spend it, KoinWorks friends. You still have to set aside some profits to develop your business.
Because after all, proper business development can be a form of investment that needs to be made so that the business can progress further.
Make Financial Bookkeeping
Memory is not enough, in running a business you need to have financial records, for example financial reports.
Therefore, making financial books is one way to manage business finances that you should not miss.
Try recording all transactions in simple bookkeeping.
This will really help you control all business financial transactions. Apart from that, bookkeeping will also make it easier for you to evaluate business developments.
Create an Annual Evaluation
An equally important way to manage business finances is to make a financial evaluation. There are at least two reasons why a financial evaluation must be carried out.
First, to display all business achievements in the past year so you can find out whether the steps taken were correct or not.
Second, to show business spending patterns in one period. This can be used to identify deficiencies and find the best steps to improve them in the next period.
Determine the Time Period
To manage business finances, you need to separate the details of your needs based on the time period.
Starting from daily, weekly and monthly expenses which are short-term expenses to annual or long-term expenses.
Create an Income Plan
Without planning, it is not impossible that the business will experience losses. Therefore, there needs to be good planning, including managing income.
To manage your income, you can do this by finding out what products your business sells well. Then, determine how much can be produced, look at market segments, and determine sales targets.
After that, develop a marketing strategy carefully so that you can achieve the planned targets.
Separate personal assets from company assets
Not a few business people still think that the money they get from their business is their personal money.
In fact, this perception is not wrong if the business is owned by an individual. However, this habit can cause business failure, you know.
Gini, for example, costs that should be for production are used to finance personal needs. This is what makes businesses lack capital.
Therefore, you need to do bookkeeping to see the company’s financial cash flow. Through bookkeeping, you can also separate personal and business needs.
Apart from that, you can also separate personal and business finances by using a bank by separating business accounts and personal accounts.
Manage Cash Flow
A business certainly needs funds to keep running. These funds will be used to finance the business including employee salaries, production needs, and so on.
Therefore, as much as possible reduce income in the form of receivables because it will hinder the business’s financial income process which will cause the business to experience problems.
This is the importance of managing cash flow in a business. When managing business finances, make sure all records match purchase receipts or other proof of expenses and document them.
Later, the details of these funds can be used to create a financial balance sheet. It is through the balance sheet that you can find out how well your business finances are.
If the cash flow is smooth, you can monitor it regularly and periodically.
Apart from that, try to pay all existing bills so that later it doesn’t become a problem in business finances.
The next way to manage business finances is to understand accounting. For this reason, business people need to understand the basic science and principles of accounting or look for someone who is an expert in accounting.
This aims to ensure that the business you run has clear and accurate financial reports that can be used in policy making, and so on.
Prioritize Company Needs
Income must be greater than expenditure.
Who agrees with the statement above?
In business, applying the statement above can be done by choosing what the business needs and what it doesn’t to avoid excessive spending.
Make no mistake, too many expenses compared to income will also create an unbalanced cash flow, you know.
So, prioritize the needs that your business really needs, OK?
Set aside business income for development
One of the tasks of financial management is to keep the business continuing to grow and develop. The more your business develops, the greater the income you will receive.
For this reason, set aside part of your business income to develop your business to make it even better.
Prepare an Emergency Fund
It cannot be denied that every business you run does not always go according to what you planned.
For example, a decrease in turnover due to the emergence of competitors or several other things that require you to think hard to solve them.
As a businessman, you must be able to anticipate these problems by having an emergency fund.
As the name suggests, you can use emergency funds for urgent business needs. For example, if you face a problem and experience a big loss, you can use emergency funds to keep your business stable.
Pay Bills on Time
Lastly, the way to manage business finances that you need to apply is to pay all business bills on time.
To avoid late payments and maintain business finances well, you can set up monthly reminders so that all bills are paid on time.
These are several steps you can take to make managing business finances much easier.
- Ritesh Sharma is a seasoned professional in the field of finance and career development, bringing a wealth of experience spanning over a decade. Holding a Master's degree in Business Administration with a specialization in Finance, Ritesh has carved a niche for himself in the realm of content writing. His expertise is predominantly in areas related to finance and career growth, where he has consistently demonstrated his ability to deliver insightful and valuable content. Over the years, Ritesh has established himself as a knowledgeable and reliable source, offering his readers practical advice and information that is both relevant and up-to-date. His dedication to his craft is evident in the quality and depth of his work, making him a respected figure in his field of expertise.
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