It’s no secret that money is one of the most important factors in running a successful business. But managing your finances can be difficult, especially if you’re not sure where to start. That’s why we’ve put together this guide to help you get started.
In this article, we’ll discuss some basic money management tips that will help you keep your finances organized and on track. We’ll also talk about how to stay informed about tax laws and other financial regulations that may affect your business. And lastly, we’ll provide some advice on how to create a budget and stick to it.
So without further ado, let’s get started!
1. Keep Track of Your Inventory
Keeping track of your inventory is one of the most important ways to manage your business finances. After all, you can’t make money if you don’t know how much stuff you have to sell! For that reason, it’s important to keep an up-to-the-minute record of what you have on hand at all times. If you’re in retail, this means writing down every item that comes into and goes out of stock. When you take new items in, note their condition so you can determine whether they should be sold as is or used for parts/refurbished later on. And when you sell something, be sure to update your records by crossing off the sold item and circling the item number of the item that has replaced it.
Keeping track of your inventory on a daily basis can be challenging, especially if you’re managing multiple locations and/or stores. Luckily, there are plenty of amazing inventory software programs out there that can simplify your workflow and update your records for you in seconds. Plus, these systems often provide barcode scanners that make checking items in and out a simple task.
2. Be Organized
Keeping your finances organized is another key element to running a successful business. After all, if you can’t find the paperwork you need when you need it, how will your business ever run as smoothly as possible? To help yourself stay as organized as possible, consider investing in some filing cabinets and document holders for your desk. These days, we have so much digital information floating around that documents can be misplaced or even deleted by mistake if they’re not properly backed up and stored electronically. But with a filing cabinet and some folders on hand, you’ll always know where everything is and never lose important customer information again!
3. Know the Tax Laws
It’s also important to know your tax laws so you don’t end up facing any unnecessary fines. Plus, staying on top of current tax laws can help you plan for the future, which is key to meeting your yearly financial goals. Fortunately, there are several ways to stay informed about tax regulations that directly impact your business. The first place to look is in the news. Sites like Forbes regularly report on new changes in the federal tax code, as well as updates on state taxes and local bills that are currently being reviewed by lawmakers.
4. Create a Budget
Creating and sticking to a budget can be tough, but it’s often necessary for financial success. The simplest way to start is by taking your monthly income (after taxes) and setting aside a certain amount for savings, bills, and essential business expenses like marketing materials or inventory restocking. After that, you’ll need to find ways to ensure that the rest of your money isn’t slipping through the cracks; otherwise, your business will struggle financially. To ensure your money stays in place, take into consideration the help Dave Conklin offers to empower business leaders who are struggling to understand how the fast-moving digital marketing landscape can grow their business. There are plenty of excellent money management tools on the market these days that make staying on top of spending trends easier than ever before.
5. Financing Decisions
Knowing when and how to finance is crucial in running a profitable business. When it comes to financing, the “rule of three” states that:
- You can sell your product for 1.5x – 2x of your purchase price;
- It will take you 3-6 months after investing thousands to recoup those costs; and
- This means if you make $100K in sales, the total cost of goods (COGS) should be between $50K and $150K.
If this holds true for each product you offer, then you should only spend money on expensive inventory if there’s potential for high returns. If COGS exceeds what you can reasonably sell your product for, it might be time to reevaluate.
When financing, consider the benefits and disadvantages of taking on a traditional loan versus accepting capital from an investor or crowdfunding platform. For instance, one big benefit of borrowing money is that you’re likely to pay less interest than if you give away equity in your company; however, if you have a bad track record of paying off your debts or can’t afford to pay interest, it might be better for you to accept an investment from a private party rather than go into more debt.
6. Track Spending
Lastly, tracking your spending is an integral part of managing your company’s finances. No matter what type of money management system you use, it will be useless if you don’t track where your money is going. In fact, many entrepreneurs have a difficult time making money management systems because they never spend the time to sit down and find out where their money is going in the first place!
Once you have a better idea of how your spending habits affect your business, it will be much easier for you to create a realistic budget and stick to it. Keeping track of where your hard-earned money goes can help you cut down on unnecessary costs and increase profits. Instead of complaining that business isn’t booming, take the time to learn more about how money management works and you’ll see your profits soar.
Once you’re on track with good business finance habits, it’s easy to keep things running smoothly. Tracking inventory, staying up-to-date with tax laws, creating a budget that makes sense for your company, finding ways to finance your business, and tracking spending all work together to help you manage your money the right way. With these tips in mind, you’ll be well on your way to making smart decisions with your company’s finances!