Wednesday, November 1, 2017

When Running A Business, Know Where Every Penny Is

The financial side of business is about knowing a lot more than what’s currently in your bank account. To get a full understanding of where your money is, it’s a good idea to figure out both your net worth and your cash flow. That way you can understand how much cash is truly locked up in things like your assets as well as your expenses. From there, it’s a matter of learning how to free up that cash when you need to.

Enough demand to meet the supply

You should always aim to spend only as much on resources as you need to meet their current demand when running a business. Spending too little and having too few resources is going to mean you’re missing out on potential business and thus potential profit. However, spending too much on certain resources, inventory, and parts can be just as limiting to your profit potential. It means ending up spending money on things the business doesn’t need. It may go even further if, for instance, you’re buying goods that need to be refrigerated or kept in dry conditions, meaning you have to pay for the storage methods used to keep them in good condition. If your money is being spent on resources you don’t need, it’s financially healthy to take more care collecting data on your business’s trends and learning what the demand really is.
Waste not, want not

The same goes for the resources that you use internally. Become more efficient will always benefit your balance directly. If you truly need certain resources then, by all means, you should spend on them. Again, it’s about figuring out your needs and not exceeding them. For instance, becoming more sustainable with your energy use is rarely going to leave your business in need. Just as switching to a paperless storage system and cutting on printing costs rarely proves a serious issue to businesses. If it doesn’t hurt to reduce your waste, then it’s important you do so.

Get to know the tax man

Current base tax rates for businesses will give entrepreneurs a lot to complain about. However, the truth is that no business should be paying those tax levels in the first place. You don’t have to do anything dishonest to reduce how much taxes you’re paying. You simply have to be aware of the many deductions you could make in your tax return that you’re entitled to. Deductions for things like banking fees, equipment and repairs, office supplies, consultation fees, and much more. If you’re not sure how to safely navigate the work expense deductions, it’s worth hiring a CPA who can help you do it.
Conjure up some credit

Looking for new funding should never be treated as a cut and dry as getting access to more of “your money”. It has to be paid back and means it will impact the future of your business finances until it’s fully paid off. However, that’s not to say you can’t benefit monetarily from being more particular about the loans you take. The better your payment terms and interest rates, the more of your money you get to keep while paying them back. To that end, taking steps to improve your business’ credit will always open access up to the loans that allow you to save more. However, keeping a close eye on reports, making regular use of affordable credit arrangements, and staying up to date with all creditors does a lot more than improve the loans you have access to. If your business gets a bad credit rating, it can have other effects such as suppliers suddenly demanding you pay in cash rather than credit.

Look at all that stuff

Your net worth is calculated not only through your cash but through the assets currently in the business. This might mean property, vehicles, computers, specialist equipment, and much more. You might think these assets are of little benefit beyond selling if you need to, but that’s not necessarily true. Look at Equify for details on how those assets can be used to help you secure funding at a better rate, to begin with. By using said assets as collateral on a loan, you can give your business more options financially when things like bank loans aren’t an option.
Get an offer you can’t refuse

When cutting expenses, you should look beyond just how you can save in things like energy and printing costs. You should also look at the services and goods you get from your suppliers. With suppliers, the guaranteed satisfaction and repeat custom of a business can often be more lucrative than charging higher prices, so there is often some wiggle room for negotiations. Look at Computer Weekly for an example, with tips on how to negotiate a lower price with data center providers.

Reinvest for return, not a nicer chair

When you make money, you must always be pouring some back into the business. Beyond paying off creditors, it can help you make some real improvements. However, for your sake financially, you need to carefully consider where you invest that money. It may be tempting to get a new chair for the office or a better business trip for your staff. But where is the return on that investment? Instead, think of return above all else when spending in the business. Market research, hiring an accountant, marketing, branding, customer service, better equipment and software. These are all areas that can make a direct and measurable impact on how much your business is able to profit, so they deserve your attention first. If things keep going well, you might one day be able to afford that new chair without worrying about the return. Until then, be smart with reinvestment.
A business owner has to be savvy with their money. In particular, there are times when business is lean or when you want to scale and you find you need more than the bank account tells you that you have. For those moments, the tips above can be exactly what you need. The money’s there, and it’s yours. You just have to learn how to reach out and take it.


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