Feature
Business Banking & Finance Managing
Create a budget Creating a realistic budget that you can stick to will help improve your money management skills. Firstly, a budget will help you set expense goals; it will identify the expenses you need to operate your business, and provide clear parameters for spending. Secondly, a budget can help you with your revenue goals; a good budget will forecast your revenue and, if you find that it is lower than what you’ve budgeted for, you can explore ways to cut expenses and increase your income.
Monitor your spending Do you know how much you’re spending each month? Not monitoring your outgoings is an easy way of letting cash slip through your fingers – you could be racking up unnecessary bills or misusing company funds, and it can be especially hard to keep track if you are constantly making withdrawals from multiple bank accounts, or regularly using a credit card for small expenses, such as treating your staff to lunch every now and then. There are many easy ways to manage your spending, from hiring an
account to investing in computer software or using mobile apps that will allow you to track what you spend from your phone. By keeping a careful log of your expenses, you can see exactly what you’re spending money on, identify examples of overspending and eliminate superfluous purchases.
Manage your inventory Your inventory can be a drain on your recourses. If you order too much, it will be sat gathering dust in storage (which you could be paying for), running the risk of going out of date or out of fashion. If you order too little, you may run up costly delivery charges to have orders rushed through to meet your demand, or lose customers to competitors with better levels of stock. Keep a clear, detailed record
of your inventory purchases against sales and consult it regularly, so you always know how much you have on hand before ordering more. By keeping a constant track of your inventory, not only will you be able to tread the fine line between having too much or too little, you will also be able to anticipate busier and slower periods and adjust your ordering accordingly. If you always run out of inventory around the Christmas period, for example, you will be able to check past records to see how much more stock you will need to order in advance.
Don’t lose track of your spending Keep track of deadlines
If you don’t know when your bills are due you might not have enough cash on hand to pay them on time. Additionally, late payments could incur penalties such as fees and added interest, not to mention having a negative effect on your credit rating or souring relationships with your lenders. To avoid missing deadlines, create a
payment schedule. Record when all payments are due, how much you owe and how they will be paid (cash, credit card etc.) You can also use this schedule to time your purchases once the most important bills have been paid.
Get invoices paid on time
Getting invoices paid on time is crucial for your business. There are a number of ways to avoid late payments, including agreeing
clear payment terms (ideally in writing) and keeping these terms short. You should also aim to send out invoices as soon as possible, always making sure to include your bank details – you want to make it as easy as possible for your clients to pay you!
Build up a cash reserve Even the most money-conscious business owners may be faced with sudden and unexpected expenses. Equipment failure, natural disasters, theft or cyber attacks – there are a lot of
things that can go wrong at any given moment, so it is prudent to keep a small cash reserve that you can rely on to cover bills or expenses during an emergency.
Open a separate savings account and make deposits whenever your budget allows, though don’t be tempted to dip into it to cover extravagant purchases.
62 CHAMBERLINK November 2019
your money
Learning how to manage money is a vital skill for all new business owners because mismanaging cash flow can have serious consequences. Chamberlink explores some simple money management techniques that can help new business owners get control over their finances.
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