5 Things You Need To Know About Small Business Finance Management
Whether your business is just starting or you happen to be an OG in the market, all business owners have one common concern and that is finance management.
The key to your small or medium business surviving the economy and its competition is your ability to make the right financial management decisions. If you want to grow your business gradually, start making careful plans around your finances from an early stage.
Coming up with good business ideas is not enough, a lot of people can easily do that. It takes a lot more. You should have a guide and structure for your finances so that you can account for everything while making profit. You also need to possess finance management skills in order to make your business successful.
Statistics show that 40% of business owners are financially unaware and inexperienced. However, they still manage to run their finances efficiently on their own. With proper planning and guidance, anyone can manage their finances by themselves. Because we care about you, we will point out five essential things you need to know about finance management. Let’s take a look:
1.You need to educate yourself
To be able to manage your finances properly, you need to educate yourself on finance management. You can start by teaching yourself about finances and how to read financial statements which are essential documents which give you detailed information about your finances.
There are 3 basic financial statements:
- cash flow statement
- balance sheet
- income statement
In a nutshell, the cash flow statement is a report on the inflow and outflow of a business’ money. It lets business owners know if their business has generated cash or lost cash during the given period. Income statements are reports that show business owners how much revenue their business has earned during the given period. Income statements also show the costs and expenses which are linked to the revenue that has been earned. Balance sheets give you detailed information about the company’s assets, liabilities, and shareholder’s equity.
2.Separate your personal and business accounts
As we have mentioned before, mixing your business’ finances with your personal funds is not a good idea. You should have two separate accounts. Our suggestion would be to open an account for your business, and make sure that your business’ income and expenses are linked only to that account. That way, when you get your bank statements, it becomes a lot easier to understand because they are not mixed with personal transactions.
Another thing that has proved to be very helpful for tracking all of your transactions is the use of financial management software. They will help you log activities such as: billing clients, tracking finances, and generating reports for analysis. Additionally, these tools also enable you to manage your taxes without needing to hire an accountant. In the long run, this option is a money saver.
3.Lower your costs
As an entrepreneur, it is essential to keep a track of your business expenses without obstructing regular business activities. How can you achieve that?
You can start by separating your expenses to fixed expenses and variable expenses. Your fixed expenses should be calculated in advance so that they do not have an impact on the business status. Variable expenses or costs depend on the type of your business and its activities, you should try to keep the expenses as low as possible.
For example, if you own a small business which sells skin care products, you can use an invoicing software rather than hiring an accountant. This will save you money, and the best part is, some invoicing tools are affordable or free to use, plus, they are easily accessible. Download an invoicing software and boom! You have just lowered your costs.
Dillali is a free income and expense app that you can use as your pocket invoicing tool. So use it to lower your expenses and see what else it can do for your business. Register here.
4.Don’t be afraid to invest in cloud-based accounting software
Investing in accounting software is never a bad idea; it will make things easier as it shows you where your money is coming from and going to.
The best invoice management softwares conveniently provide SME business owners insight into their business’ finances, and have features for saving, updating, tracking, and accessing information. Another perk is that they can be conveniently used anywhere and at any time, as long as there is internet connection.
The version of dillali might be more appealing to you, however, going premium would allow you to access exclusive features that would make tracking your business finances more convenient for you.
5.Always measure and monitor
This is the most important thing to remember. You need to always have the right information so that you can take the right actions. The growth of your business is dependent on how you keep track of your money. You need to keep records of all of your financial activities. This is important when deciding on plans, revenue, and activities.
One way you can do that is to keep track by recording and generate reports from a software or online tool for SME financial management. This will enable you see the trends, measure performance and forecast growth easily.
To sum it all up
As a business that provides services, we understand the excitement that comes with starting and running your own business. We also know how nerve-racking it can be, especially when it comes to dealing with finances and expenses. You need to prevent the consequences of poor financial management on your business. So, keep these five things in mind and lead your business to success.
Get yourself organized with dillali.
Dillali is one of the leading online invoicing software in Africa. The software is suitable for small businesses, individuals and freelancers.
This tool offers many features for your business needs that helps you automate and simplify your business processes. Manage your invoicing and payments, expense management, and financial reporting all in one place.
Have you experienced any difficulties while running your business? How did you resolve the issues? Let us know in a comment below or you prefer talking with us and sharing more about your business and challenges book a time and we are happy to e-meet you.
See you next time!