6 Tips for Managing Your Business Finances

Vector image of an accountant with calculator analyzing balance sheets and financial report statements

Follow These Tips to Maintain Positive Cash Flow

Your business finances are crucial as they determine how you run operations and grow. Therefore, business owners need to learn how to manage their finances to avoid getting into a struggle that jeopardizes their investment. You should always be in control of the finances if you want to maintain a positive cash flow. But how can you do this? The following are six tips for managing your business finances.

1. Analyze Your Finances Periodically

The best way to stay ahead of your company’s finances is to analyze them periodically, possibly monthly, quarterly, and annually. This can help you learn areas where you need to improve performance or eliminate factors causing losses. Moreover, by evaluating your financial statements, you can gauge a high-performing department and which one is lagging behind.

In addition, this analysis can help you in benchmarking as it allows you to know where you stand against your competitors. Consequently, you can use the results to adjust accordingly for a competitive advantage. It is vital to hire experts to analyze your cash flow statements, invoices, bank statements, assets and liabilities reports, and balance sheets. Financial analysis can give you better control of your business finances.

Related: 8 Monthly Financial Reports That Every Business Owner Should Review

2. Invest in Your Business

When your business is making profits, you should reinvest into your business. Undoubtedly, you have to pay yourself, give your employees bonuses, and so on. However, you need to put some money aside to grow your business. You can purchase advanced tools, take your employees through training, take classes on leadership or business management, acquire an asset, or outsource certain services, such as tax preparation, payroll and accounts receivable management, from specialists.

You should also put a particular percentage of your profits into a cash buffer account. This way, you can finance your business should your cash flow be interrupted. Again, don’t forget to get professional help to avoid taking uncalculated risks when investing.

3. Customers Should Pay on Time

Late payments from clients can negatively impact your business significantly. Dealing with unpaid invoices is one of the common reasons that lead to closure. Thus, you need to find a way to make sure your customers pay on time, mainly if your clients are other businesses. One of the tactics to employ is negotiating and coming up with a clear payment upfront.  Hence, your clients will know the payment policy to observe earlier.

Also, if you have a larger project or if you are supplying a client with goods worth a significant amount of money, you can request a deposit or upfront payment. Besides, it will be best to make payment easier for clients because a complex process can lead to delays. You can automate the invoices and allow a wide array of payment options. You should also send invoices to clients as soon as possible, and they should contain all the relevant information to avoid misunderstandings.

Furthermore, you should send clients friendly reminders when the due date is drawing near. You can provide an incentive for early payments like a discount and penalize late ones to motivate your customers. But you should be ready to renegotiate payment terms, especially if a client always pays on time.

Related: 9 Tips to Get Your Invoices Paid Consistently and On Time

4. Consider Financing Options

If your business is struggling financially, you should not shy off from loans, provided you have a well-organized repayment plan. Loans can help you get the latest equipment, purchase inventory, or expand, among others.

However, you need to repay your loans on time as you want to maintain a good credit score.  For example, ensure that you pay your business credit cards every few weeks. Also, avoid loans with higher interest rates. The financial expert you work with should help you make the right calls.

You may want to consider invoice factoring to get payments immediately to keep your operations going. The factoring company will handle the collection from clients, saving you time and the hassle of calling and sending messages. You can attain business stability if you avoid late invoice payments. Unlike a business loan, invoice factoring does not create debt so it does not show up on your balance sheet.

5. Find Reliable Investors

Many investors are willing to help companies grow. But they have different terms, which can either benefit or disadvantage you. It is vital to choose a partner who believes in your objective. Also, you need to determine if you want to work with an angel investor or a venture capital firm. Also, you should be well informed about the resources an investor wants to offer you. This can help you find a reliable investor who will support you for years.

6. Observe Inventory Accuracy

It is crucial to have accurate inventory if you want to maintain your business finances. Excess inventory is overwhelming, and it can cost you money as you will be spending more than you need. Besides, it will increase your carrying costs since you will need more storage space, hire additional warehouse employees, and increase your insurance premiums. Also, your products can go bad, forcing you to dispose of them or sell them at discounted rates, leading to losses.

On the other hand, having less inventory than the existing market demand can make you lose sales. Also, running out of products quickly can result in poor customer experience. Therefore, it is essential to learn how to attain inventory accuracy. You can use an effective inventory management system, such as technological tools, to help you know when you need to restock.

Inventory accuracy can save you money as you won’t have to deal with product spoilage or lost sales. Also, using advanced software can save you time because you won’t have to recount your inventory now and then. These technological tools will sync your in-store and online catalogs, and subsequently, you will receive stock updates in real-time. Moreover, inventory accuracy can help you improve productivity and customer satisfaction.

The Bottom Line

The above-discussed tips can help you manage your business finances competently. You should work closely with your employees and different professionals if you want to take your business to the next level. Remember, you need to be patient to make informed decisions.

Your Questions Answered Quickly

Whether your business is thriving and you can’t keep up, or you are waiting on clients to pay, Universal Funding can help your growing company. Call us at 800.405.6035 or complete our rate form today to learn more about invoice factoring and how it can improve your company’s cash flow.

About Universal Funding

Universal Funding is a nationwide invoice factoring solutions leader, supporting growth-focused businesses with scalable factoring solutions. With its invoice factoring, payroll funding, and purchase order financing services, Universal Funding provides clients with the working capital needed to grow and support their businesses without taking on new debt. Ranked as one of the nation’s top invoice factoring companies, Universal Funding provides cash flow financing for businesses all across the United States.