Proper management of finances is one area that contributes to the success of a business. It is also said that most business fail due to money related issues. Entrepreneurs should keep an eye on their finances to ensure the health of their business. Here are some tips that entrepreneurs can use in managing their finances:
1. Record keeping
Keeping financial records is not only important for an audit, but also in monitoring the performance of your business. As an entrepreneur, you need accurate and timely financial statements. If you do not have the discipline or time to keep accurate financial records, you should consider outsourcing accounting services. This way, you can make decisions based on timely tracking of expenses, revenues, assets and profits of the business.
2. Accounts Payable
Purchasing inventory, raw materials, and other goods on trade credit allows a company to defer its cash outlays, while accessing resources immediately. When managed appropriately financing purchases can contribute to effective working capital management.
3. Avoid extravagant expenses
An entrepreneur should not spend money on unnecessary expenses that are not related directly to the generation of revenues. For instance, entertainment expenses with the tab going to the business or purchasing expensive office furniture for a business where clients seldom visit.
4. Control inventory
Inventory should be controlled to ensure that it is at the desired level. Having too much of it ties up cash and incurs expenses such as insuring and warehousing. Too little inventory can result to lack of products and loss of sales and customers.
5. Managing account receivables
Money received from customers does not flow with the same rhythm that expenses do. Payments received are irregular while expenses come regularly. It is therefore important to ensure that accounts receivables is managed properly in order not to have cash flow issues. Invoicing should be done on time and so should collection of payments. This would ensure that expenses are paid when they become due.
Managing finances is an important part of ensuring that revenues remain with the business to fund its growth. To some entrepreneurs, this may be an upheaval task. Contact Five Star Accounting today to see how our services will assist you in meeting your accounting needs as your business grows.