If you’re a business owner, one of the best things you’ll learn how to do is make smart financial decisions. Keeping your finances healthy is going to be an essential part of keeping your business up and running. Not only up and running, but thriving, too! But just how you stay financially smart as a business owner when you usually have various things to pay for and tough decisions to make?
MAKE SURE YOU’RE NOT UNDERPAYING YOURSELF
As a business owner, it can be tempting to save all of the money you earn and put it back into your budget. However, you also need to allow room to pay yourself. It’s smart to put plenty of money back into your budget, of course, but you need to give yourself a reasonable payment without feeling guilty, too. Make sure you’re compensating yourself fairly while putting enough money back into your business budget!
DEFINE WHAT YOUR RISKS ARE AND UNDERSTAND THEM
All businesses have some level of risk involved, and every risk could impact your company. To plan for your financial future, you need to consider both long and short-term risks carefully. You must map out the threats to your productivity so you can build a clear picture of what could happen in the future and then come up with plans for your insurance needs, any emergency planning, and anything else that could affect your finances.
OVERESTIMATE YOUR EXPENSES
If you own the kind of business that operates the project to project, it can be difficult to know when something is going to go over budget. A lot of what goes into a successful business is merely planning and being able to handle unexpected expenses. Make sure you anticipate any surprise expenses so that you don’t end up stunting the growth of your business. Overestimating is always better than underestimating what something is going to cost you!
DON’T FORGET: TIME IS MONEY
Always incorporate time into your budget. Working with people who are paid for their time, remembering this becomes even more critical. Underestimating timing will increase your costs directly and could throw your plans off if you’re not careful. You’ll lose time when it comes to your delivery schedules, as well as find your momentum decreasing as your team shifts their thoughts to other projects. Setting deadlines later than you think a project will be done can help.
If you finish early, it’s a bonus, but at least you’ll always deliver projects on time. This will also help you to build a positive, trustworthy reputation in your industry.
ALWAYS REASSESS YOUR BUDGET AND CHANGE WHAT YOU CAN
Your budget is going to change as your business changes. It’ll evolve with your business, so you need to be willing to change it based on your growth. You will need to adjust to new and perhaps fluctuating costs, so stay mindful of this. For example, a construction business will often start with hired equipment, rather than equipment that they have bought. However, once the business is growing and doing well, looking for forklifts for sale at Auslift may be necessary, as owning the equipment becomes more lucrative and makes more sense to your budget than hiring it.
SET CASH FLOW TARGETS
Prepare and maintain a cash flow forecast so you can easily keep an eye on it and control it. This should be done weekly, and this will enable you to get an accurate outlook for the next 6-12 months. Setting cash flow targets gives you a more clear picture of what you’re aiming to do and can make your business even more effective.
AGREE ON CLEAR PAYMENT TERMS
Having clear payment terms set out right from the beginning is a must. If you don't know what your payment terms are, you can’t accurately get an idea of when you are going to be paid. You can’t manage cash flow if you don’t know when a payment is overdue! Make sure you create clear payment terms and agree on them with clients. You should also have a smart invoicing process. This will include giving incentives for paying early, and clearly explaining what will happen if payment is not made on time. Don’t merely invoice once and expect to be paid. You may need to invoice multiple times to get paid. Collaboration.