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Contributing Author: Louis Rix
When you own your own business, the importance of managing your business finances balloons into something far greater than simple budgets, banking and income tax.
An exceptionally managed business can destroy its success with a wrong move or unwise decision. Someone who excels at personal money management can be knocked off center by the extended learning curve involved in business budgeting.
The good news is that today's computerized world makes financing all the easier.
Accounting packages, loans calculators and monthly budget assessments can all be carried out with the aid of computer packages. The automated nature of today's world gives you the edge you need but without sound principles, even the most complex program can be manipulated to degrade profits.
A Failed Business Runs on 'Gut' Feelings
The most imperative foundation for every business is sound accounting. Not only does this track money in and money out, but also provides a factual history of the business. These records tell the owner whether a costly marketing campaign was as successful as it seemed.
It warns against dwindling profits before crisis hits and prevents previous mistakes from becoming future mistakes. Small businesses based on check account balances are insufficient for all but the tiniest operation.
As a small business owner, you don't need an accounting degree. An ability to analyse the figures an accountant provides should be adequate.
Concentrate on Cost Reduction as Much as Profit Building
The importance of revenue boosts is known by most but cost reduction is equally important. Perot's rule states that 80% of costs come from 20% of your inventory. By focusing on cost reduction, you can thus maximize your revenue substantially.
Advanced Budgeting & Financial Planning Give You Room to Strategize Freely
The hard work you put into your budgeting for the coming year leaves your work week free to concentrate on the more forward thinking strategies of management and marketing.
Developing the habit of budgeting ahead of time will set you in excellent stead for the future when your business becomes larger and more demanding. Forward budgeting also gives you a view towards the future that can act as a motivating goal and allow you to respond more quickly to opportunities.
Your financial plan will be prepared and ready for loan applications in the future.
Furthermore, it will prevent financial crises from popping up later. You needn't take a complicated approach to budgeting at first. Begin small and let it organically develop as the business expands.
The Money Doesn't Exist Until it's in Your Account
Focusing more on the sale than the collection of payment will probably land you in crisis. Establish a strong, fair collections process to keep your cash flow fluid. Without it, you'll place assets into sales that don't end in payment or worse, bank on funds that never come.
The common sense rules of money are integral to the success of your business.
Saving more than you spend, investing in your values and only getting into debt over increasing assets are guides that will take your business to greater heights.
Instead of taking out a loan, buy a used car and invest your money where it will grow. These are the basics that will keep you on track and in control so that your business can soar.
About the Contributing Author:
Thank you to Louis Rix, financial expert and marketing director at Car Finance 247, the UK’s leading online car loans brokerage. Louis enjoys writing on numerous financial subjects and writes for leading publications such as The Telegraph. For more information in relation to Car Finance 247 please follow them on Twitter and join their growing community on Facebook.
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