Every business, big or small, is always concerned about one thing – managing money. Proper financial management is crucial to the survival of every business venture. It takes more than just a good idea to run a business. Every business needs a financial structure that generates a profit to stay alive.

Not all business owners and freelancers, however, are adept at handling finances. Often business owners lack the experience with accounts, having never worked in an accounting firm before and so make many rudimentary mistakes along the way.

Here are 5 financial management tips to help small business owners and freelancers navigate the tricky financial waters so their businesses can thrive:

1. Separate personal and business finances.

Always keep your personal and business finances separate. This entails opening a corporate bank account for your business and all related expenses and cash in-flow in it. This should help you track your outlays and keep you in control.

You will also do well in opening a savings account dedicated to your business, wherein you can transfer a certain amount of money from each payment that you receive and gradually build a considerable corpus. You can use this money to pay taxes.

2. Create a Realistic Budget.

Financial budgets within a business are often treated like a chore and an unnecessary piece of paperwork to handle. This is not the case at all. Just like with a business plan that is only good on paper until the business gets off the ground, a budget at least lays out what the financial plan is moving forward.

It acts as a guiding hand rather than locking the owner into certain decisions ahead of time. A budget can also indicate more clearly whether projected income levels will be sufficient to handle the ambitious capital expenditure plans to expand the business in the coming year. This can then highlight whether marketing needs to be pushed harder or expansion plans need to be scaled back if it is not believed that sales will support the desired level of spending.

Also Read: How to manage Cash Flow for SME’s and Startups – Tips & Solutions.

3. Avoid unnecessary spending.

No office needs luxury items if it cannot afford them. Always spend according to your budget and even try to save yourself some cost where necessary. There is no point in getting mahogany desks for your office room when plywood would do just fine. Just remember, you are setting up your office and not decorating your living room to entertain guests in. If it’s something you don’t necessarily need in office, then it does not have to be there.

Giving your employees basic salaries and amenities in office is your responsibility. But facilitating them way beyond needed, with things that don’t matter is an additional expense. Whether you are a start-up business or own a well set up company, if your profits are not enough to give your employees extra facilities, then you don’t need to. Learn to manage your business expenses.

4. Properly manage your accounting and don’t get slack on invoicing.

One way to track your expenses is to have an organised system to keep track of your funds. Keep the history of your expenses and sales in the form of invoices. No business can thrive if it does not record its earnings and investments. Also, it will reduce a chance of a fraud.

Fours ways to ensure you don’t get slack on invoicing:

  • Send out invoices as soon as possible after providing goods or services.
  • Set payment terms of seven days to make sure that payments are not forgotten or lost in the process.
  • Always follow up on sent invoices. You can make this easy by creating set templates for email or SMS follow-ups.
  • Reference invoice numbers and cross-reference these with payments.

Also Read: Choosing The Best Invoicing Software For Small Business in Nigeria.

5. Go Digital! Use online computing solutions.

Latest reports suggest that more and more small businesses are adopting online solutions for financial management needs. The trend is fast catching on as spending on technology is proving to be far more affordable instead of hiring more people.

Managing bills and finances is a complicated task and can get stressful as well. Lots of companies are seeing the opportunity to help small business in this area. There are several solutions and packages available that is not only sorting out the finances better but also help in taking effective business decisions.

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