Basic Financial Management of Small Business


Although it looks easy and very simple, every small and medium business principals are important to implement good financial management. At least small businesses have cash record book entry and also cash out.

The reality of a small business is more interested in discussing ideas and business innovation, production and sales targets as well as marketing strategy compared with talk of financial management.

Small businessmen consider that financial management is one of the things that can run by itself. If good business then finance business also will be as good, that perception may have a point, but remains cautious because it could mislead. True if the source of the existence of a cash business is sales and profits. But business is not just how to make money, but also about hoe to expend and control.

Financial management is not merely how to manage money in cash. But more than that, finance management is how to manage your finances to generate profits as well as utilizing a source of capital in order to finance the effort. Although simple, small businesses still need to apply financial management. Here are a few foundations.

Create a Cash Flow Budget 
Update your company's financial condition is associated with major components like sales, cash flow in and out or else. Budget for cash flow helps ensure that companies could pay for all the expenses and allows the company to manage income and expenses effectively.

Basic Financial Management of Small Business

Get to Know the Changes in Cash Flow 
Load staple operations have a significant impact on the cash flow of the company. At the same time the pressure that comes from the rising prices of raw materials will continue to be a financial burden on the company. Cash flow also affected by state debt accounts receivable of the company. This is of course deeply affects interest charges.

Manage Receivables against the Client
There are a number of different ways on how to manage a company's accounts receivable. Establish effective credit policy is one important part of the management of cash flow. SMES also need to have a strategy on how to encourage the client to want to pay sooner. For example, charging interest on the account is past due.

Check the Status of the Debt
Please check regularly the financial companies with debt payment schedule. This can help in the eyes of creditors about how well the company can maintain its credit obligations. Useful practices to see how much the company owes to anybody and whether the company now has a schedule of payments that had been due or not.

Reduce Cost of Operating 
Find out how to cut operational costs. For example, by finding a cheaper raw material, but still able to keep the quality of the product. At the time the company received an order that many, you can add the worker with the status of the contract. After that, upgrade production machines using the latest technology to be more efficient in terms of power consumption to reduce electricity cost.

Use Credit Effectively 
Credit facilities depend on the state of the company, business plan and existing credit facilities. The better the state of your company then it will be good also prospects of the company in the future. Thus, it will have an impact on the provision of credit to companies with more ease. Therefore, uses of credit funds are properly and efficiently.

Excess Cash Flows for Expansion 
Consider on how to changes in the economy that affect financial companies such as currency or interest rates. So this could affect the company's income or financial burden. Any surplus cash flow can be used for business expansion, paying of debt and maintain the level of productivity of the company.

Doing business is not just a matter of strategy, promotion, business options as well as the popularity of your business. Running a business needs to think about the question of financial management as well. Financial management a good effort will largely determine the success of your business. Good luck!

Read Also:

Related Posts
Disqus Comments