Increase Your Chance of Business Success Through Proper Money Management
Cash flow is at the heart of your life as a business owner. You may have greater goals beyond the acquisition of wealth, but your day-to-day operations will revolve around your working capital, how you spend it, and how much of it you can attain. If you can take command of your business’s finances, you are in better control of the health of your company. Here are five things you can do to achieve that control:
1. Write Down Your Goals
No plan works without a clear set of goals. If you want to manage your finances better, you need to know what you want to achieve. Talk to your accountant and determine not just how much money you need to make to break even, but how much capital it will take to scale and grow your business. The clearer that goal is, the more easily you’ll be able to manage your budget.
2. Focus on Paying Off the Inevitable Debt
Most businesses aren’t able to operate without going into some form of debt. No matter how well your company does, you’ll likely only use that success as proof of concept to fuel the next round of fundraising, so you can scale quickly. The problem with debt is that if not paid swiftly, it will grow. Given enough time, it may end up crippling your organization in the future.
Speak with your accountant regarding your accrued debt. While you should focus on paying it off as soon as possible, you should also see how you can do that most efficiently. For example, the money you make spending on improving your business might be more than the interest your debt has, making immediate payment less efficient.
3. Take Stock of Your Capital
You cannot manage what you cannot know, so one of the best things you can do for your financial health as an entrepreneur is to take stock of how much working capital you have. Don’t just look at the money you can spend. Look at where your cash is tied up to get a clearer idea how much you have. Just because something is earmarked for a specific purpose doesn’t mean it has to stick to it if an emergency comes up.
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4. Spend and Save for the Future
Proper capital management isn’t just about the startup’s immediate concerns. It’s about having money for future developments and purchases. The money you have isn’t just for today’s problems. If the solution you have to a current issue involves spending so much that the future of the company is imperiled, it’s not a good solution and you should look for another one.
Thinking about the future goes beyond saving money. The aspects of the company you spend on also depends on what you plan to do with it. Many startups are, for example, sold on the value of the customer list rather than their product. If that’s your exit plan, you should put more money toward developing a strong and loyal list of clients to make your startup more appealing to potential buyers.
5. Create a Reasonable Budget
All businesses need a budget, and as an entrepreneur you’re going to get familiar with cutting things out of it. Your capital is limited, and there’s a lot to spend on. However, unless things are particularly dire, you shouldn’t hesitate to spend on improvements for employees. They may not need the best chairs ever, but that doesn’t mean you should buy the cheapest seats possible. You should also never cut down anything that improves the core performance of your offering.
The Bottom Line
While these tips are far from the only ones you’ll need as an entrepreneur, they should get you off to a good start. Managing your money can be difficult, even mind-boggling at times, but your success is dependent on it.
About Universal Funding
Universal Funding is a private funding source that has funded thousands of businesses and more than $2 billion since 1998. We turn your accounts receivable into the funding you need through invoice factoring and can have capital in your hands in a matter of days.