You can have the most innovative business in the world, selling unique products and offering one-of-a-kind services, and you can have many customers who want to spend their money with you. However, if you don’t have a good handle on your finances, none of this will matter; you’ll still find yourself in difficulties, and you’ll still potentially have to shut everything down, which is obviously the last thing any business owner wants.
The good news is there are a number of great day-to-day practices you can put in place for your business that will ensure – as far as possible because there can always be unforeseen circumstances – that your business is financially secure. Read on to find out what they are so you can start using them today and strengthen your business massively.
Know Your Day-To-Day Running Costs
Every business has day-to-day running costs to consider. These will be things like utility bills, rent, salaries, taxes, stock, and so on. They are things business can’t run without and are, therefore, essential costs. It’s crucial that you know what these costs are and can account for every penny.
Knowing what your costs are will help in a number of ways. Firstly, by having a good idea of what you’re spending and when the payments are due during the month, you can ensure you have the money to pay for them. In other words, you won’t overspend on something else because you know you have to ring-fence a specific amount of money to keep the business running smoothly.
As useful as it is to know this figure, you should aim to make at least that and, ideally, more each month. So you can use your day-to-day running costs as a minimum target to reach. If you’re not reaching it or there isn’t much profit left over once you have done so, you know you need to look at your outgoings and reduce them as much as possible, or you need to look at your profit margins and increase them where you can – or both.
We briefly mentioned above that reducing your business costs will be a good exercise if you feel you’re not making enough money, but it can actually be a good thing to do even if you are. That’s because there is no such thing as being too successful, and the chance of making more money in business should never be ignored.
By reducing some of your costs – including essential ones – you can make more money, so it’s well worth spending some time looking at what you might be able to do. Shopping around for suppliers is always a good idea, but you can also look online for discount codes which might help. For example, you could use a Taxslayer promo code to get money off tax preparation; the more you save, the more you can re-invest in the business.
Get Paid On Time
The longer it takes you to get paid, the worse that is for your business finances and your business as a whole. If you’ve done the work and there are no queries or complaints, and you’ve invoiced for the job, you’ll expect to be paid within your terms, whatever they might be (often 30 days for businesses).
If there are late payments to deal with, this costs you more money, time, and it impacts your budget and planning. No matter how much you have invoiced, if you don’t see the reward for your work, it won’t help business. In most cases, you will have lost money.
There will always be some clients who wait until the very end of the period in which they can pay to do so, and perhaps you do the same. If you have agreed to those terms, then as long as they pay, there is nothing you can do. However, if they don’t pay or they take longer than you asked, you have a few options. One is to use a factoring service. When you do this, you are paid straight away, and the factoring company is the one to chase up the payment. They take a percentage of the invoice as their fee. Otherwise, a reminder system can be useful. As long as you get paid on time, your business will be able to continue, but as soon as payments start coming in late, you’ll have problems, so do whatever you can to ensure this doesn’t happen.