You don’t have to be a financial genius to be a successful entrepreneur. Sometimes it is enough to listen to helpful advice to improve financial management. In this article, We share a few of them. Let’s take a look.
Managing forecasts, balance sheets, and the like are not easy for an entrepreneur. When you start a business, you don’t just think about numbers. In fact, your success depends on how you apply these numbers to decisions about current issues.
Here are five tips from entrepreneurs to help you succeed in financial management.
- Profit does not determine success
For a growing company, profit is not the best indicator of how things are going. In reality, this indicator can be discouraging. A new, fast-growing company is bound to gobble up all the money, and it will happen very quickly.” If your business is successful, you will find that your cash reserves are depleting much faster than you expected. Your income may be small, but that’s good because the growth of the company itself will be intense. Instead of counting income, keep an eye on the dynamics of business growth, it will help you understand if you are on the right track.
- Understand which metrics are important for your business
But Joshua Reeves, CEO at ZenPayroll, also advises you to think about the unique metrics for your business and be sure to include them in your calculations.
“For example, for a company based on a subscription model, two metrics are very important: customer lifecycle (LCC) and customer acquisition costs (CRC). LCC will help you understand how much your customers are worth, and RPNK will draw your attention to how much it costs to attract them. By tracking these two metrics, you can easily assess the benefits of different channels and focus on the most effective ones. ”
Take a closer look at your business model and talk to industry partners to see if they can help identify these unique metrics.
- Don’t waste money on stupid mistakes.
When you are faced with a myriad of business responsibilities, it’s easy to accidentally make a costly mistake. Parsons gives a perfect example: “Often businessmen do not manage accounts receivable and enter into some kind of additional agreements, instead of forcing clients to pay on time. The money you get today is much more valuable than what you get in four months. The sooner the money ends up in the bank, the greater the benefit to you. If the deadline for which you must receive money from customers is extended or customers are late with a payment, you can enter a deferral fee or charge interest on the amount. Many in small businesses do not do this and, as a result, lose money that could already be in the bank. ”
- Conduct a cost audit
“My company employed over thirty people in four offices. I found out that absolutely all employees (even the most honest ones) filled out the timesheet at random, which resulted in me having to incur an unnecessary expense of $ 2,300 every month, ”says Rissell.
These amounts are growing, especially in small businesses. As your business expands, overspending can become a problem and you don’t have time to keep track of every dollar that leaves the company. But finding time is still necessary. So be sure to do a cost audit once a quarter.
- Value your time
“Small business owners often work on a very tight budget, which forces them to do a lot of their own,” says Reeves. “However, their most valuable resource is actually their time. Entrepreneurs must constantly remember to spend time only on the most important lines of business. For example, a business owner who takes three hours a week to manually calculate staff costs is likely to think he’s saving money, but is actually wasting time and energy that he could invest in growing his business.”
Believe it or not, your attempts to save money and do everything yourself can actually lead to the fact that you get a lot more money down the drain. Technology plays an important role in small business because it allows you to outsource and automate complex tasks.