Proper money management is a must in any business that wants to stand the test of time. Your cash inflow has to be closely monitored and properly managed to ensure a smooth and cost-effective operation of the business.
The responsibility of money management in a typical small scale business lies on the business owner because he is probably the only one that has unquestionable access to the finance of the company.
Here are tips on proper money management in your small scale business:
Account for every money spent
That little money spent and not accounted for eventually accumulates into millions which affects the financial health of the company in the long run. Every single financial transaction made, regardless of how small it is should be properly recorded.
This automatically promotes the need for financial record keeping, have a clearly outlined record of your financial daily, weekly, monthly. With this exercise, it makes you aware of the financial health of your company, there would not be any sudden financial bankruptcy without you noticing it and finding a way to avert it.
Restrict unnecessary expenses
Cut down on expenses, this does not mean you should not embark on heavy financial spending, but do this only if it is very important and it would result in the growth of the business. Whatever expenses the company is embarking should be closely scrutinized to ensure the return on expenses is achieved.
It is always advisable to put yourself on a salary, yes! you the owner of the business. Place yourself on a salary and separate your personal account from your business account.
The best practice is to open a corporate account and pay your salary into your personal account. This way you have placed a restriction on your access to the company finance.
Budget, plan, and forecast
Planning for the future saves you from the stress of anxiety during unforeseen circumstances. As a business owner, you need to make financial predictions backed up with research into the future, on how your financial flow would look like. You can work with these predictions to save, spend, invest, or whatever needs to be done according to the said prediction.
At the beginning of every year, it is best your budget for the year or at least quarterly. Plan the projected company growth for the upcoming year, expenditure, and so on. With all of these budgeting and plans in place, you already know what your expenditure would look like as compared to your income as well as give you insight into how the company finance would look like in a new year or quarter if there are no disruptions like war, natural disaster or pandemic like in 2020.