Managing the business needs evaluation and implementation of many pivot factors, and financial management is one of those coming on the top. The success rate of a respective business can depend on many factors, but most of the time the prime factor affecting is it’s finances. It is said that business finance can make it or break it. Finances are always looked at foremost when business owners plan a new venture. To a great extent, money is the factor that affects its building and business structure. Having financial independence is one of the fundamental objectives of any business, whether it’s in the initial stage or a historical one. And this independence can only come when the business owner is skilled in efficiently managing the finances.
Financial management is required at each stage of the business operations regardless of its type and size. It will start from buying or renting an office, factories, or warehouses until the product or service reaches the end consumer. Any new decision made for any part of the business will impact the financial structure. Often small and growing businesses experience negative cash flows and losses in the developmental stage only. The balance sheet is stronger on the debt side and decreases the credibility, which sometimes even results in the shutting down of business.
Therefore, finance management can not be neglected at all. This article will help you know better about managing business finances with some tips and tools.
Tips For Effective Financial Management!
The importance of financial management is equivalent in all organizations, whether small or large. When seeing from a financial aspect, successful and struggling businesses can be differentiated easily. How successful companies have adequate planning, forecasting, and implementation from those that did not succeed. Below mentioned are some of the tips that will work to manage the finances effectively.
● Creating A Budget And Following It
Looking at and analyzing the current and future needs will build a strong base. Unfortunately, most of the time, businesses set the best budgets but are unable to follow them. Sticking to the budget is necessary however, certain uncontrollable situations may need change. Budgeting will help your business achieve its revenue goals, and the liquidity ratios will be clear.
● Switching To Automation
Fintech is rapidly growing, and numerous software are available to ease business operations. Switching over automation will decrease the errors and make the tedious processes simpler and fast. Here making the right choice is essential. Each organization’s requirement differs, so choose the one that fulfills your requirements.
● Loan Management
Many small business owners think that taking loans may put the business in a debt circle. But in reality, if loans are planned and managed well, they can fulfill the working capital requirements as the circumstances in the market can change anytime, and businesses might need more funds. Presently small business loans are available at competing rates even with no collateral.
● Using Corporate Credit Cards
Corporate credit cards increase the purchasing power of the business. These cards have greater limits than personal ones, and short-term credit loans are available without charging any interest. Corporate credit cards will not increase personal liability and easily keep small business finance compliant.
● Separating Personal and Business Finances
Always keep the personal and business finances separate. Not keeping differentiation will result in more spending of private funds without any record. This will increase the disorganization and imbalance in the incoming and outgoing funds. Also, the business owner will not be able to take the benefits of tax deductions on business expenses.
● Tax Planning
As the business grows, the financial structure changes and becomes more complex so, the planning of taxes becomes necessary. Hiring professionals to plan and manage tax will be a good idea. They understand the tax structures better and suggest the best possible ways that will bring out the wanted business outcome. The below picture shows the improvement in the operations with finance management and its percentage.
Must Have Tools for Finance Management!
Managing the finances can be a never-ending job if all the processes are carried out manually. The business owner will have to spend all the time looking at finances, and the core activity will lack focus. Thanks to technology, that reduced the efforts and time on routine financial tasks.
Here listed are the essential must-have tools for effective financial management.
1. Accounting Software
Managing the accounts can be a boring business activity, but inaccuracy in this can cost a lot to the organization. The repetitive tasks of accounting like invoicing, expanse tracking, billing, tax calculations can be carried out by the software effortlessly. Another major advantage will be that the software providers assure the accuracy of the operations. Therefore, the recurring activities can be made fast and error-less. As a business owner managing the accounts which need to record every single and small transaction can be diverting, no one can handle each part of the business so, to rely on standard accounting software can bring a good change. Various research has shown that growing businesses struggle with running accounting operations, and 60% of them are moving towards integrating accounting software. The various software available also offers customization and integrability with different devices that do not need to change the IT structure.
2. Payroll Software
The payroll process affects the employees’ productivity, and that directly impacts firms’ growth. A growing business needs frequent hiring, which increases transactions with each new candidate. While making the payroll processes, various calculations and factors are taken into consideration, like time and attendance, tax deductions, and reimbursements. Manually calculating at month ends can be time-consuming and error-prone. Implementing automation and ending the traditional manual work using payroll software is the need of every new-age business. Using software will not only increase the efficiency in the operations but also grow transparency between employer and employee. As through software, the employees can review all the payment transactions independently. Moreover, the payroll solutions are integrable with all the modules required to calculate the salary, and some of them also link performance management with it. Therefore using payroll software will result in a seamless payroll process keeping it compliant and lawful.
3. Inventory Management Software
Managing the inventory can be a big deal if the company does not have adequate tools. Especially when it comes to wholesalers and manufacturers, inventory is the backbone and its management is the top priority. Having less stock surely impacts the business, but over-stock can also freeze the cash flow. Therefore, balancing the needs according to the money in hand is necessary. The inventory management software provides features that combine all the minor processes involved to make effective management. A business might be providing hundreds of products and their management becomes complicated, which can only be solved with the use of technology. The software in the market is now providing many unique features that also help to keep up with the quality standards, manage the sales reports, alerts on less inventory and packaging. Having efficient inventory management will always keep your customers satisfied and increase the business success rate.
4. Expense Management Software
A company has countless micro and macro expenses that need to be recorded. If any organization does not practice recording and managing expenses, then the profitability of the business can not be guaranteed. Initially, having an estimate of all the expenses and then recording the actual ones will help you compare and forecast it better next time. Business owners are bound to pay different parties involved in order to stay in the market. Expense management is not only about recording the expenses made on employees but also requires reimbursement and its criteria and procedures. Growing businesses often neglect to record small expenses thinking that would not impact the final outcome, but it does show it affects in the long run. Many companies have most of the employees working on-field, and they provide reimbursement for travel accommodations, and it becomes vital for them to record every single transaction otherwise, the balance sheet will never get telly. Even when a company provides reimbursements, an employee expects to get them soon. If it gets delayed, that demotivates them, so a constructive expanse management software is required to manage the finances.
The success of a business can largely depend on the way they manage their finances. One of the company’s primary goals should be having effective management of their finances to meet their objective. For growing businesses managing all the activities are crucial, but the finance structure needs to be strong from the base itself to run a long way. When an organization gets into dipper debts, coming out of it needs extreme efforts. The future is uncertain, and any sudden circumstance can entirely change how business works, so preparing for the worst circumstances is always recommended.
The article has thrown light on the ways and tools for effective financial management for growing businesses. The use of technology can help you streamline the business finances and help you focus on your core activities. Implementing fintech and taking its advantage will surely bring efficiency in the overall business and a step towards achieving the set goals. Hope the tips and tools mentioned help to manage the finances of your growing business.