A dilemma that business owners often grapple with is how to manage finances.
It is important to keep your finances organised, so that you do not lose money. As you get involved in daily operations, you may lose track of your finances.
Here are some practices that can be followed to manage your money.
Keep your business accounts separate
Having the same account for personal and business expenditure can lead to complexities later. It becomes difficult to segregate accounting transactions and can adversely affect the business credit score.
A separate business bank and credit account will make it easy to prepare your taxes. Your personal expenses will not affect your business credit score, if the accounts are separate.
Track your finances
You may lose sight of expenses and payments received from customers in the daily management of your business. Do you have enough cash flow for your next marketing campaign? Is there enough inventory to process a sudden order? Have any of your clients failed to pay in time? Financial planning entails these and many other concerns.
You could use ERP (enterprise resource planning), accounts and inventory software and other tools to keep a pulse on the movement of your cash or inventory.
A financial ERP is a software program that gives you updated business information - balance sheet, cash flow statements, profit and loss, ledgers, inventory movement, etc., on one platform. It helps you track all your expenses and payments received or due from clients. It drastically reduces the chances of missed invoices, or payment deadlines, thereby reducing your losses.
According to a 2017 study in India by KPMG and Google, digital small and medium businesses grow twice as fast compared to their non-digital counterparts. The report suggests that digitalisation could help them increase their contribution to India’s GDP by about 10%.
Engage a financial expert along with various software programs for accounting and taxation, to manage your accounts. Their advise, guidance and monitoring will keep you updated on your money matters.
Preparation of tax liabilities
It will be easy for you to estimate your tax payments and avoid penalties if you have been monitoring your expenses.
15 minutes every week
A weekly review scores over an annual one. Which is your major cost guzzler, and where can the value engineering be initiated? Which is the major income source? Do you need a business loan? A 15-minute financial review every week could help you weed out unnecessary expenses. Awareness of the strong and the weak links in the business operations will help you make informed decisions.
These steps will help organise your finances and improve business productivity.
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