Images of happy buyers and full bank accounts pulled you onto the path of entrepreneurship, and the thrill of the journey is keeping you there. There’s just one problem, though: You’re no financial guru.
The reality is that you’re not alone. Research shows that 29 percent of companies fail simply because they end up running out of cash.
The good news? A few pointers are all you need to master your business finances. Here are three finance tips to help new business owners to achieve monetary success long term.
Let’s jump in!
Table of Contents
1. Record Keeping
An essential component of well-executed business financial management includes maintaining accurate and complete financial records.
Many laypeople can manage their finances without specialized software or spreadsheets. However, business owners absolutely must maintain detailed records to keep their financial situation on track and avoid experiencing major financial shortfalls.
For instance, you’ll need to record your income and expenses. You will also need to track your accounts, payroll, and inventory.
In addition, you can’t simply jot down what you received or spent. Instead, you must also spell out your transaction dates.
All of this information may ultimately help you if you are audited by a government agency down the road. Likewise, it may prove useful if you become the target of a private lawsuit.
Creating comprehensive invoices is another important part of effectively managing your business finances. That’s because invoices outline in detail the services or goods rendered to your customers, as well as the desired payments and payment methods.
Be sure to create branded invoices to give your business a professional image. For example, include your logo, your business information, and your branded colors on each invoice.
You can easily use a free invoice template online to generate such invoices.
3. Profit Calculation
Yet another important step in controlling your business finances is to correctly manage your profitability.
You can’t simply add up your revenue to determine how much profit you’ve generated. Instead, you need to total your revenue and then subtract all expenses to determine your actual earnings.
Your expenses should include your transaction costs. They should also include the indirect expenses associated with running your business.
In addition, if you provide contract services, be sure to factor in how much you spend on labor and material. These are your direct costs. You also need to include your indirect costs, like insurance, fuel, equipment maintenance, and rent.
Make Your Business Finances Work for You Today
As you embark on the entrepreneurial path, you must boost your knowledge of how business finances work. Only then can you confidently maximize your funds and take your business to the next level financially.
Consider the above-listed tips for financial management as you strive to build a thriving business in the months and years ahead.
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