Management of your business can be an extraordinary task. Just take a look at all of the businesses around you. There is a constant struggle to not only generate revenue but to maintain a standard of profitable business. This can be very difficult to accomplish as revenue comes in, there may be some tendencies to immediately spend whether it’s on inventory, expanding the business or other interests.
So, what are some of the basics needed to effectively manage your revenue? Where should you place your money to help the business continued to grow? How can the business be more efficient? We will address these questions, and by the end of this reading, you’ll be better armed to navigate the rough waters of your business’ finances through some succinct and easy steps that include:
- Establishing a business bank account solely for business finances.
- Staying organized by utilizing accounting software and hiring professionals.
- Making business taxes a priority.
- Establishing and improving your credit scores, business and personal.
- Weighing your business’ opportunities and begin the process of acquiring future financing.
- In fact, pay closer attention to your most productive customers.
Through research, it is said that the top 20% of your customers generate 80% of your revenue. The team at Kapta explains in the post, Our KAM Process: Your Roadmap for Building Customer Engagement, that getting to know your customers on a deeper more personal level is critical to the success of your customer engagement process.
Once, engagement is solidified, and with the additional revenue generated from a loyal customer base, your business is now in a better position to not only track budgets but to also effectively manage timelines and secure status updates on entire accounts. In other words, quality customer engagement results in higher revenue, and higher revenue results in the positioning of the stabilization of your finances.
Understanding the dynamics of having your business finances in order is a strategic advantage that big businesses use to nudge out their smaller competitors. Implement the following strategies and grow just as big.
1. Establish a business bank account solely for business finances
Although the business’ finances are priority, the number one priority is definitely your personal finances. What makes this the number one priority? It makes it easier for you to maintain your business prowess along with maintaining compliance with tax law. With this separation, bookkeeping is much easier and properly identifying expenses allows you to stay in control which leads to the business being more effectively managed.
The most important thing of the separation of the finances is that your personal finances have a fence of protection should the business ever run into legal trouble.
2. Value business accounting practices
Business accounting practices are a great tool that allows the business to identify early on if there’s a problem area that needs addressing. Not only that, but it can be an indicator of where the successes come from.
Some areas of the business may be more successful than others. For example, a sales department may not be doing their job as well as the marketing department. Solid accounting practices tell the story about the proper placement of numbers. On the other hand, there may be terminology and documents that may not be easily understood by you as the business owner, so it would be a good idea to hire an accounting professional to assist you in better understanding the nuances of accounting.
An accounting professional can assist you with the proper software that will be integrated into your business and streamline the process of the transfer of information, and therefore, proper guidance is quickly delivered.
3. Pay business taxes timely
Once your finances are professionally organized, having a solid grasp on business tax requirements will help your business sustain itself. Business taxes is the one area of all businesses that creates the most stress and confusion. A misstep can ruin your business and also lead to criminal charges if found warranted. Hence, with a concentrated effort to maintain compliance along with professional guidance such as a certified public accountant, the business will progress.
4. Maintain a constant focus on your credit score
You must always make the business’ credit score a top priority. Financing is the lifeblood of any business. Any shortfall in access to capital and you are on the verge of trouble. There are times when you may need to purchase some additional equipment, need a business credit card or loan of some sort. Eventually, your business will need cash as cash is king. Attempting to qualify your business for financing is largely dependent upon both your business and personal credit histories. A solid business credit rating is integrated with your personal credit rating and will determine your terms of financing whenever needed.
To maintain a top credit rating, the business and you must perform the following:
- Pay all bills according to the terms in a timely manner.
- Avoid loan defaults, bankruptcy and judgments.
- Never max out business credit cards.
5. Understand your financing options
In order to deal with those moments where you may need a short-term boost in cash to grow your business, there are different types of loans that the business may be eligible for. To better understand how the business may qualify, the business needs to have a minimum credit score in the area of “good” along with a solid track record of revenue. Early on, begin work on establishing your credit. Get a list of various sources of finance and prepare for a loan even though you may not be in need it right now.
With the utilization of these tips, you’re well on your way to more effectively manage your business’ finances. There is no coincidence between successful businesses and those who fall a little short. With you being more proactive in stabilizing the financial future of your organization and by providing clarity as to its direction, establishing a solid roadmap can more effectively guide your business in reaching its goals.
Interesting related article: “What is Business Finance?”