How You Should Manage Your Company's Money

How You Should Manage Your Company’s Money

Cash flow mismanagement in a business, regardless of size or industry, can result in slow growth or, worse, bankruptcy. Unfortunately, many entrepreneurs are inexperienced and untested when it comes to proper money management, at least at a commercial scale. Fortunately, it doesn’t take an Ivy League school graduate or a highly experienced CEO to manage company money responsibly. Here are six tips on how to efficiently manage your company’s money.

 

Use Technology to Your Advantage

Financial software products are becoming a key asset for modern companies. It’s quick to install and deploy, easy to scale, ensures data integrity, and is cost-efficient. A good example of a fintech product in action is legal to spend management software, which helps law firms and in-house legal teams strategically plan and control their expenses. With fintech products, you can effortlessly create and update your company’s budget, negotiate fees, set up automated invoice payments, and draft financial reports and forecasts.

 

Stay on Top of Deadlines

At the very least, you should know when your business’ account payables are due. Businesses encounter many bills throughout the month, from accounts payables from vendors to credit card and business loan payments. If you are unaware of when your bills arrive, you might not have enough money on hand when the time comes you need to pay for it. This can sour business relationships or result in expensive late fees or additional interest. It also affects your business’ ability to apply for credit lines in the future.

 

Monitor How Much You Spend

As a business owner, accountant, or in any other role that involves financial management, you need to know how much you spend per day, week, or year. Failure to monitor spending can result in overspending and inefficient use of available business capital. Although everyday business expenses might not individually cost a lot of money, whether it’s pizza for the entire staff once in a while or a new coffee machine for the breakroom, these expenses can easily add up over time. Monitor your spending and factor in every business-related expense, including uncashed checks.

 

Know When and When Not to Spend Money

To avoid weeks when your business’s cash flow is limited, always time your purchase. Avoid unnecessary expenses and only purchase goods or services that your business absolutely needs to function. If you do not have enough cash in hand to cover an expense, wait for your outstanding accounts receivables to get settled before purchasing anything. Timing your purchase is also a good way to minimize tax liability. Prior to the end of the fiscal year, you can buy business supplies, so you can claim them as a deductible on your tax return.

 

Create a Strong Fiscal Budget

Write a clear and concise budget plan that you can use to simplify everyday money management. Budgets help you set income and expense milestones, and they make it easy to remain financially accountable. Your budget plan should lay out the major expenses incurred by your business to remain operational. A budget plan should also forecast the amount of income your business receives in a given timeframe, e.g. monthly, quarterly, or yearly. If you find that your income at the end of the year is lower than the number stated on your budget plan, find ways to reduce expenses and generate more income.

 

Focus on Bestselling SKUs

SKUs, also known as stock-keeping units, are essentially each individual product line that a business provides and that retailers carry. If you have too many SKUs available at any given time, you may be stretching your business’ budget too thin. Rather than have 10 different shampoo scents or juice flavors, focus on the product lines that are generating the most money. This can also be applied to digital products and service subscriptions.

 

Capital is the lifeblood of any business; without it, a business simply withers away. It doesn’t matter if you have the best product in the market or the top team in the industry. Without proper money management, it’s a gradual downward decline to the bankruptcy court. Use the aforementioned tips to manage your company’s money in a way that grows your business quickly and scalably. Every dollar counts, and knowing where and when to put it can make the difference between long-term success and failure.