Doing business better to ensure survival and success is imperative from the first day. While many aspects of a new business are usually watched closely, more than 80 percent of business startups collapse as a result of poor or improper handling of the finances. In most cases, the use of better money management would have enabled the fledgling company to be able to weather the storms and go on to see the desired success.
Common Finance Issues and Their Causes
Putting sound money management skills in place can help enable you to keep your company in the black. Numerous financial problems can occur without them, including:
- Inaccurate accounting
Small companies especially need to have an accurate understanding of their account balances at all times. Without them, it is all too easy to overspend or bounce checks, and it will not be long before you end up unable to pay the bills or to order new supplies. Ongoing problems in this area will close your company before long.
Entrepreneurs have to be positive-thinking individuals. Unfortunately, this means that they may tend to be a little unrealistic in their projections for success and income. Buying new but unnecessary equipment and extras can easily eat away at profits even before they are received. It is of the utmost importance to be wise and limit spending to necessities in the early stages. Learning to balance spending with actual income is important, and it will be an excellent habit to form for the long term.
A slight spike in profits may also cause some business owners to think that it forecasts an ongoing trend. Unfortunately, this may not be the case at all, but it could be good for business. A more level plan would be to check the actual inflow of profit and then ensure that it will be continuous before new and larger investments are made.
- Unable to make budget
Another problem of not keeping a close eye on the finances and the budget is to not be able to meet expenses as they come. This could include such necessary things as the salaries for your employees, keeping the lights on, paying for marketing, or not even having enough to get your product to the sellers.
Benefits of Maintaining Accurate Financial Records
Staying on top of your finances at all times will enable you and your company to thrive. One of the best ways to do this is to have an accountant keep up with the books – and they should do this daily if possible. Keep close track of daily receipts, deposits made, and all expenditures; and don’t forget that receipts and balances must be kept for the cash drawer, too.
Balances need to be obtained regularly, in light of upcoming bills and expenses. By knowing the monthly balance, business owners will know when the company can increase production, hire new employees, upgrade or purchase additional equipment, etc. When income decreases, the owner will also know when to cut or minimize expenses, or to temporarily set aside planned expenditures for growth.
Invoicing for Better Financial Management
Being able to send out invoices to your customers in a timely manner is important to business survival. The benefit is that it enables you to increase your monthly income and reduce your losses. Stabilizing your monthly income is another powerful benefit.
One place that you can find a free invoice template is at invoicehome.com. Invoicing enables you to understand which customers have paid already, and which ones have not. If you are unable to determine this, some customers may overlook paying, and you will not know how much could be coming in as opposed to what actually came in for the month. Not knowing this will lead to financial disaster because your financial projections will be off.
Some clients also have a habit of not paying. Without a record of invoices and a stated system of late charges or rewards as an incentive to pay, you would not understand which clients to extend credit to, and which ones you should not. Invoicing samples can enable you to get started with better records for a more stable income.
Creating a system of invoicing can put your company on track financially because it enables you to better understand where the money is goingto and coming from.Guesswork can be eliminated, enabling you to make plans for spending based on better information.