A crash course to business finances
Thanks to the large popularity of small business owners encouraging their friends to start their own companies, we have a lot of new small businesses on our hands. The problem is that not everyone is cut own to be a small business owner and they all do not come with the same type of skills when it comes to business finances.
Some of the things you have to maintain control over include establishing a credit policy along with having a strong vendor policy too. You need to bring in the money from your customers and having a credit policy is the best way to do this. When you get paid will play a huge role in your small businesses ability to survive. If you extend credit to your customers, do you have money to pay for this credit? You will experience lows in your company's cash flow and you will need to have cash reserves to make up the difference in your cash flow as you wait on your customers to pay their bills.
To establish a credit policy within your company you will need to make a list of all the bills that you have and create a payment schedule for these bills. This way you know when you have to receive payments from your customers in order to pay back the loans that you have that are necessary to keep your business alive. Some companies struggle with getting their customers to pay on time with the credit policy. This usually means you aren't being aggressive enough or it is time to consider using another motivations technique like offering discounts, providing free products, and offering insight into new products that are in the works.
You need to work on the way in which you are invoicing your customers. An invoice should be generated immediately upon sending out the order. This gives the customer time to pay their bills and also provides you with plenty of time to work with the customer to arrange payment options and other things.
To know how your credit policy is working, you must have a good record keeping system. By purchasing QuickBooks or another program you will be able to monitor your accounts and know exactly how much money you owe and how much money is coming in. controlling your books is vital to your organization. QuickBooks is easy to learn and there is an online system you can use, making it easy to balance your books at home after-hours when you have more time to devote solely to your business finances.
Never borrow more money than you need. When you are calculating loan amounts, use accurate numbers and try to avoid borrowing too much as it can take a long time for you to repay them, especially if there is a big problem with your company like a sales slump or insider fraud. Loans are a form of debt and they need to be managed correctly and carefully. You need to consider the various lenders that are out there when you are looking for a loan. Some lenders have low interest rates whereas others will absolutely kill you with higher interest rates.
Do you have family and friends that have invested money into your company? You must manage all the investment accounts you have in order to have a strong business. Failure to repay your accounts on time will lead you to struggle on building relationships with your investors and it won't take long for them to come after you and call in their loan or ask for the collateral.