The idea of running your own company can be quite exciting, but you cannot ensure the survival of any business without proper financial management. Whether you’re just about to launch your start-up venture, or you’ve already been running a company for a while, it’s a good idea to brush up on your fiscal skills. A business thrives when you’re able to ensure the incoming money from sales of products or services is higher than its operational cost. This can be done by employing strategies that increase sales, reducing your overhead costs, and other methods. This guide will go over the main tips you need to make sure your business not only stays afloat but grows with time.
Have the right people on your team
The old saying’ teamwork makes the dream work’ is very true when it comes to helping a start-up succeed. You need someone to manage customer relations, another to work with PR, a product manager, and a financial manager. Who you bring on to the team depends on your exact business and your qualifications. For example, if you’re a coder about to launch an app, you might not have the experience needed to deal with the business management side of things.
If you’ve ever had to ask yourself the question ‘what can you do with an MBA?’, then you probably aren’t qualified to deal with the finances yourself. Your best bet would be to partner with someone who has experience in proper financial management to ensure the long-term health of your company. If you’re managing a new company and cannot afford the salary of an MBA graduate, you can offer equity shares in lieu of a high monthly income.
Stay on top of cash flow
A company’s cash flow is the net of how much money is coming in versus how much is going out. In most companies, incoming cash is through sales, subscriptions, and the likes, while outgoing costs may be due to office rent, taxes, employee wages, advertisements, and more. It’s important to find ways to keep the net cash flow positive.
There are a number of ways to do this. You should avoid expanding too quickly, as that would increase overhead costs. You should consider a co-working space instead of an office to save on rent. Similarly, avoid making too many sales on credit, as you would have incurred the cost of manufacturing and retailing a product without immediately having gotten the payment for it. Hiring a financial manager can help you keep track of sales and stocks in the most effective manner.
Use software for better efficiency
Technology has allowed us to obtain the same results as successful businesses at a lower cost and a faster rate. A business deals with a lot of data — from B2B invoices to customer sales — and it is not easy to stay on top of all that information. People with an MBA degree are trained in business analytics related to management. As long as you have the right person on your team, you will be able to offload this task to them.
The most effective way to work through data is using specialized software. There are a number of accounting software options that can speed up the workflow for your financial manager at an affordable cost. This would allow them to review and analyze the information quickly and create reports to help you make more informed decisions. If you use cloud-based software, the manager can access it from any device. This can markedly improve the efficiency of the company.
Alongside an experienced accountant and financial manager, you will need someone to manage your inventory levels. Similar to accounting software, cloud-based inventory management systems can help you track which items are in your warehouse, in your retail outlets, and which are marked for shipment. Combining this inventory data with information about seasonal trends, you can plan an effective marketing strategy. You would know which items are likely to sell more and stock up via your supplier or ensure they are available in stores.
For instance, if you run a grocery store, you’re more likely to sell chocolate near Valentine’s Day or sell cakes during Christmas break. You can refer to the sales data from your financial manager to know which products you should prioritize for seasonal boosts. Using this method, you will never have to worry about running out of stock for your most popular items, nor will you mistakenly waste money by ordering inventory when it isn’t needed.
As you can tell, the key to business success depends on having a good financial plan. You might have a wonderful idea for a product, but you need someone with financial knowledge to help ensure you can turn that idea into a successful company. Like how a construction company might invest in heavy machinery, you need to invest in the right employees. A good business needs a good team, and one of the key players in that team is a financial manager.