Money and finances in business can be tricky to handle. On the one hand, you have to spend money to make money, but on the other, you don’t want to spend too much to compromise your profits.
There’s a fine line that you have to tread as a company owner so that you are producing the very best goods and services but turning the maximum amount of profit.
You have to be careful not to overspend, and be prepared for peaks and troughs in sales where some times of the year are busier than others. Here are a few things to bear in mind.
Business is expensive to get set up, and in the beginning, you might need a loan to get things off the ground. There are lots of things to bear in mind here, as well as the repayments you will also have to think about things like interest rates, and how you will pay everything back if a business doesn’t pick up as quickly as you think.
The last thing you want is to end up on a slippery slope of debt before your business is even off the ground. When you are borrowing, always be sure to factor all costs into your budget to make sure that you can cover everything.
You will need to make sure you don’t run into any personal debt either as this is something that can put the business in danger as it will is considered as an asset by creditors. One thing you could do if you have a fantastic business idea but not much cash is to seek out investors.
These are wealthy, experienced business people who are looking to invest in startup companies and offer cash to get off the ground in return for a share in your company. They can also offer invaluable business advice and assistance too. Have a look online and see if there are any investors you could pitch to.
That way you start your business debt free and have excellent help on board.
Stick To a Budget
Budgeting is something to take very seriously when it comes to your company’s finances. Borrowing money is useless if you don’t know where the best places to spend it is when it comes to growing your business.
There are lots of tools, templates and software programs online that can help you manage this and make budgeting quick and efficient.
When you are budgeting, be sure that the right amount is being spent on stock, materials, insurances, premises, and employees amongst other things.
Have a category for everything and work out how much needs to be spent in each area. Make sure there’s nothing you’re overlooking- but have a contingency fund just in case.
If you’re wondering whether it’s cheaper to outsource as opposed to keeping areas of your business in-house, in many cases the answer is yes.
For example, if you want to stay in-house you need to hire new employees which are an expensive task. You have to spend money on advertising the role, reading through CVs, interviewing and then training the selected candidate.
Not only do you need to hire workers to do the roles in your business, but you need to have somewhere for them to work too. This is likely to mean more rent and higher running costs on bigger premises. Not to mention the additional equipment you will need to buy.
When you keep different departments in-house, you absolutely have to ensure that things are being done correctly.When you outsource, you have peace of mind that each company is professional and at the top of their game.
It’s a weight off your shoulders since it’s not being dealt with by you, and the work is still being done to the best standard. If it means avoiding mistakes and lawsuits, it could be a good move financially for your company.
Use Business Software
These days many areas of your business can be managed online, using software which makes light work of time-consuming tasks.
If you use things like accounting, finance and payroll software, you help to eliminate errors and can help the financial side of your business run as smoothly as possible.
When it comes to your company’s finances there really is no room for error- any inconsistencies in things like tax could lead to huge penalties and fines- if the government deems you to have done it on purpose you could even face a prison sentence.
While software is never going to totally eliminate the need for an accountant sometimes, it can help to keep things accurate and efficient day to day.
If you’re currently paying an employee to sit and go through manual books you’re wasting their time and your money. It’s something a computer program could do in minutes, and it allows you to put the workers you do have in your company to their best use.
Prepare For Unplanned Expenses
Having an emergency fund as a buffer is crucial in business. Anything could crop up from broken down equipment to lawsuits which could send your company into haywire.
It’s worth having the right insurances in place here to protect yourself if something goes wrong. In the medical industry, you can face issues such as Qui Tam lawsuits, you can find everything about qui-tam lawsuits here. Most businesses will need public liability insurance and employer’s liability insurance, this will cover your back if any issues do crop up.
This could be a result of an accident or injury due to any of your products, services or business premises. You could experience a burglary, a fire or flood which wipes out your office or equipment, It’s a smart move to have money put aside that you can dip into it if you ever need it.
It can seem morbid planning for the worst, but if anything happens then you’ll be so glad you were prepared.
Look at Your Competitors
As a business, you’re in competition with other similar businesses for the same customers. And one thing many people will look at when buying products is the prices, so if you’re selling similar items for much higher prices than your competitors, then you’re in trouble.
It’s not to say you need to be the cheapest as of course, you do still want a healthy profit margin, but it’s worth being aware of what else is out there and what similar businesses are charging for products and services like yours.
Make sure you’re priced accordingly to avoid customers hopping over to your competitors, and as a result, your sales and profits dropping. These days it’s easy to compare anything, just do a search on Google and decide how your prices matchup.
Don’t forget, it’s not even directly similar businesses you’re in competition with, in some cases any business at all can be competition just as customers will spend their money and when it’s gone it’s gone.
If your company’s finances aren’t right, you could be bankrupt and out of the business game before you’ve really even started. Everything needs to be considered and planned to the last detail to allow you to get it right. There’s lots of fantastic tech and software out these days that can make life easier and be managing your finances much more efficient.
What’s your biggest financial concern in your business? Have you ever came up against any of these issues, and if so how did you resolve them?
Share your thoughts and comments below.