Unless you run a financial services business, you probably did not start your company because you’re a finance person. At the same time, keeping a close eye on what’s happening with your money is crucial. The better your financial management, the more resilient and stable your business can be. You can make improvements with the tips below.
Monitor Your Money
You may have a bookkeeper, an accountant, or an entire financial team that oversees this part of your business, but you still need to be proactive about staying on top of the books. This means knowing what’s happening on a weekly and daily basis. Set profit goals, know whether you’re reaching them, and adjust if you have to.
Another element of this is optimizing your cash flow. You do not want to find yourself in a situation where you are owed a lot of money on paper, but you can’t pay your bills because you’re waiting for others to turn invoices around. Have a reservoir of money as well as systems in place to make sure customers pay you on time.
Reduce Your Expenses
An advantage of this close look at your finances is that you are in a better position to identify waste and reduce expenses, but you need to go further than just looking at columns of numbers. You need to dig down into what’s happening in various departments and if there are better practices you can put in place to save money. Sometimes, this can mean looking at your business on a granular level.
If you have a fleet, you may want to look at ways to save on fuel and maintenance costs, but you should also look at such things as idling. This happens when an engine is running although the equipment is not currently being used. Some idling is inevitable, but too much can lead to fuel waste and more maintenance issues. You can read more about the costs associated with vehicle idling, laws that prohibit it and technology that helps prevent it. You may want to work with supervisors and department heads to identify similar instances of waste throughout your company.
Alter Your Prices
Either raising or lowering your prices can generate big improvements in your financial situation. Dropping your prices can help attract new customers. You shouldn’t reduce prices so much that you aren’t making a profit; even a small reduction can attract more buyers. Alternately, in other situations, the best strategy is raising your prices.
It’s important to periodically review what you’re charging and determine if an increase is warranted. It can be a tough sell to some customers, but you need to keep up with inflation and cost of living increases as well as market rates. What’s important is that you don’t get stuck in the idea that whatever you’re charging always must stay the same.
Have a Process for Purchasing
What happens at your company when it’s time to purchase equipment or supplies? Even if it’s something you buy regularly, such as paper, you should periodically check that you’re getting the best deal possible. When it comes to spending on bigger ticket items, having a system in place will help you avoid common errors, such as purchasing the wrong item or spending too much money. What the process is will vary based on your company and the industry you’re in, but making sure that you consult with the employees who will actually use the equipment and do thorough research are both important.
Address Money Problems Early
Staying on top of your finances means that you’ll know about problems as soon as they crop up and addressing them early will help you take care of them before they become much more difficult to solve. Seeking additional funding or creating a debt repayment plan is much less stressful when you can take time to look over your options and formulate a plan.