Your business budget may feel like it's in need of constant protection. This may be true — but that doesn't mean you have to worry about it every minute of every day. Instead, here are a few finance management tips to help you navigate business tasks like hiring, buying new equipment or expanding your operation.
1) Visualize your budget with a balance sheet
According to the U.S. Small Business Administration (SBA), the first stop on your finance management journey should be a balance sheet. Creating a balance sheet helps you visualize your budget by listing out hiring costs, salaries, assets, and more. This gives you a chance to track the life-cycle of a dollar through your company — and to make sure that dollar stays in your budget for as long as possible.
2) Understand accrual vs. cash accounting methods
The SBA goes on to explain another important element of finance management: the accounting method you choose.
The accrual method is immediate and reports exactly when you made a sale or completed a transaction, no matter how long it takes the money to move to or from your account. While this approach can save money on taxes, it is also more difficult to manage.
The cash method, on the other hand, only reports financial transactions when they're fully completed. This means that, if you make a deal in April and aren't paid until May, you'll report that you only made money in May. This approach is simpler and clearer than the accrual method, but it isn't as effective for long-term transactions.
Depending on what industry you're in, you may have numerous opportunities to negotiate prices with suppliers or even clients. Don't be afraid to take these chances head-on. Some business owners may feel uncomfortable navigating tricky budgeting conversations, but the key is to approach with confidence and do all the background research required to improve your financial literacy.
4) Schedule and budget for big purchases
Whether you're a long-time business owner or not, you've probably made at least one big purchase in your personal life — such as a car or a house. In the same way you planned to buy these things, you'll need to plan purchases for your company. Don't just put money in the bank; pull out your calendar and create a tentative schedule so you know exactly how much to save and when to take each step.
5) Take care of your business credit
According to Business News Daily, keeping good business credit is vital for many future tasks, like leasing a new office building or taking out a loan. Take care of your company's credit the same way you would your own.
6) Don't be afraid to get creative
Business News Daily also notes you may need to get creative with your financial management strategies. For example, if a client never pays on time, you may need to start billing them differently to protect your company's cash flow.
7) Never get complacent
In the business world, finance management is a never-ending journey. This means that even if you create a solid financial plan, implement all the best billing techniques and set up your books like a pro, you still need to regularly review your company's financial health. Getting into this habit doesn't just protect you from making mistakes with your money; it also brings attention to any suspicious activity or potential fraud you may otherwise overlook.