Business finance or the “cash flow” management in business is one of the most vital function in business management. Business finance is so broad and it has many functions like reading and interpreting financial statements, detailing the money that is coming in and going out, managing the money well, planning to make operation more profitable and even cost-cutting and minimizing business risks. Needless to say, mismanagement of business finance is the number one reason of business loss and worse, even bankruptcy. Below are some tips for an effective and efficient business finance management.
1. Understanding Financial Statements. The most important financial statements of every business are cash flow statement, balance sheet, and income statement. Cash flow statement is self-explanatory. It is the money that comes and goes from business operation, funding and investing. Balance sheet, however, details the liabilities, owner’s equity and assets at a certain period of time. Income statement which is also known as (P&L) profit and loss account, details the revenues and expenses over a period of time, which is usually annually. These financial statements are equally important as their reports are the basis of efficient planning and strategy to achieve the maximum sales potential.
2. Hire Professional Help. This is one of the usual mistake that new entrepreneurs make. Hiring professional help, especially in business finance can save you time and money. If you don’t really have an idea about business finance management, it’s good to start with the help of professional. Managing it on your own without enough knowledge is a big risk for the business.
3. Cost-Cutting. I have explained a lot of ways for cost-cutting. This is the reason why financial statements are so important to learn. Your financial statements help you see the movement of your money and help you analyze the correct approach or strategy to increase the profit and have an effective cost-cutting. Business finance is all about increasing the money coming in while minimizing the money going out as much as possible.
4. The 7-Day Rule. The 7-day rule refers to settling dues not more than 7 days upon receiving the due statement. 7 day or before 7 day to settle dues is one good habit that every businessman should practice. It also shows that the business is in good standing. On the contrary, paying later than 7 days shows a lack of commitment, responsibility, and discipline. You would not want your business to have this kind of reputation. If you want your business to be taken seriously and earn respect, start by paying your dues on time. This small act of discipline has a big impact on your business reputation and the more trust worthy you are, the more customers, clients and business opportunities that will come to you. -M.D.
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