When starting a small business, what was your main goal? Of course make a profit or profit. In order to achieve that goal, you need to understand the basics of how to manage small business finances. If business financial management goes well, you can manage your finances more wisely and regularly.
One of the biggest causes of failure in running a business is an error in managing finances. Therefore, it is very important to learn small business financial management, especially for beginners who are just starting a business. Below are 7 ways to manage finances in a small business. You can practice it for businesses in any field, from culinary and retail businesses.
Separate Business Finance
The main thing you must do is separate your business and personal finances. It’s easy, create an account that differs between personal needs and business needs.
The separation of accounts is done so that the finances in these two different sectors are not mixed. Problems may not be felt when starting a business. When the business has started running and a lot of transactions come in and out, you will feel confused.
Make a Business Budget Planning
Initial preparations by creating a special business account have been carried out. The next step is to make a budget plan. Simply put, you have to make a detailed spending plan and income target.
To make things easier, you can start from the smallest scale first, which is to make a daily financial plan. Try to put the plan into practice. If it goes well, make a weekly, monthly, and so on.
Pay Bills On Time
In running a business, usually someone will rent a place that is paid monthly or annually. If you also rent a place, pay the rent on time before it is due.
Other bills you may have to pay include electricity and internet. Better pay off the bill and don’t be late. If you pay the bill over the due date, you will be fined.
Record All Cash Flow
Still related to the previous point, it is important for business owners to record all cash flows to ensure that the business continues as planned. Record all income and expenses even if the value is very small.
This work does require a very high level of precision. It will be very risky if this recording is done manually. We recommend that you prepare a special application that can help perform this task.
Calculating Profit and Loss Clearly
The steps that have been done previously will make it easier for you in the fourth step. Money for business is centralized in one account, automatically all transactions in that account are definitely related to business. You don’t have to worry about it anymore.
Furthermore, recording all cash flows will make it easier for you to calculate the total money coming in and going out. If the total money comes out more, it means you have not benefited from the business. On the other hand, you can practically get an advantage if the money that comes in is bigger.
Use Profits as Capital
Did you know that most companies start as small businesses? That means, the small business that you are starting right now also has the potential to become bigger in the future. The key is a gradual increase in capital.
Be Careful in Agreements with Outside Parties
Cooperation with third parties is needed to meet business needs. Examples are cooperation with brands to market one product or cooperation with suppliers of raw materials.
Before signing the cooperation contract, pay attention to all the points that you will agree to. Make sure that nothing harms you and the business you start. Don’t let your business be hampered by signing a cooperation contract without careful consideration.
How to manage small business finances is mandatory knowledge for everyone in the business world. If you succeed in carrying out the 7 steps above, it is likely that the business you are starting will be successful.
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