As a business owner, you face different challenges on a daily basis. One of them is money concerns, so here are four tips (of many) to help you manage your business money more efficiently.
Pay the bills on time
Not paying the bills within the payment term can result in a big impact on your business finances. For instance, late credit card and loan payments often draw large amounts of interest. Plus: late fees to suppliers and utility providers consistently also add up. Tax is another factor to not be overlooked. Paying late can result in serious and costly penalties.
Luckily, there’s a simple solution to this problem: create reminders. This will not only help prevent missed bills, but it also provides you with the opportunity to plan ahead, which is just as important as paying the bills on time.
Negotiate before signing a contract
Bargaining on a price with suppliers before signing a contract can often pay off in your favour, resulting in a better deal for your business. And, before making a decision, it’s a good idea to examine purchase terms such as late payment penalties and grace periods.
Create an emergency fund
Never underestimate the power of saving. It is highly likely that at some point unexpected expenses will come up if they haven’t already. It is important to consider all the options and where an unexpected cost could come from. Some examples would include vehicle break down, equipment maintenance and supplier price increases. If a piece of equipment is vital for your business to function every day, what is your plan if it suddenly needs repairing?
By depositing a percentage of your earnings into a business account regularly, you will be able to build a nice sum of money that you can fall back on in an emergency, preventing the need of reaching for the credit card.
Don’t mix business and personal expenses
There is a long list of reasons why mixing your personal and business finances is not a good idea – including tax issues, personal liability, and messy account records. Separating your finances also makes it easier to track business progress and report income. If things become tight, resist the urge to mix your personal and business funds, as it is guaranteed to create a mess that you will have to deal with at a later date.
The best and easiest way to separate funds is to open a bank account exclusively for business transactions. This way you will always know how much cash your business has and be able to avoid wasting time with budgets, overspending, and making errors on your tax return. Although separating funds seems daunting, it doesn’t have to be, and the end result is worth the hassle.
As business advisors, we offer independent input to implement best practice that will free up management time and provide you with accurate timely financial management information for better decision making. The more you understand your business finances and cash flow, the better prepared you’ll be when making day-to-day money management decisions.
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