It might be challenging to run a small business. Small business owners have a variety of responsibilities, including managing their company’s finances, marketing, human resources, regulatory requirements, and customer service. To put it mildly, you must be a jack of all trades.
One of the hardest parts of running a small business can be maintaining a steady cash flow. Maintaining cash flow means that the business has enough cash to meet its daily and monthly expenses.
Since money management is such a common problem, we’ll discuss the five best ways in which you can manage the money of your business to ensure that your cash flow is always in the green.
Have a Financial Plan for your Business
- To get a clear picture of the present and the future of your business, it is imperative to have a detailed blueprint on hand. This financial plan will include everything related to budgeting, tax planning, future growth, debt, as well as risk management.
- The most important aspect of this financial plan is budgeting. Having a monthly budget that takes into account the monthly income and expenditure can be a gamechanger for your business. This budget gives you a clear idea of the potential cash that you’ll be earning so that you can plan your expenses accordingly.
- This budget can be created by analyzing the past financial statements of your business. How much did customers spend on your products? How much did you pay your staff? How much did you pay for utilities like electricity and internet? How much do you require to pay off loans? And so on. This line of financial inquiry and evaluation will provide a clear picture of future budget estimations.
- The budget can also help you plan for availing of Business Loans with low-interest rates. You can use a Business Loan EMI calculator to calculate the payments that would need to be disbursed every month.
- The best way to budget is every month. This is because most of your expenses will be a recurring month. Once you have your budget, you can use it to plan your financial goals such as expanding your business, purchasing new inventory, or hiring more employees.
Have a Corporate Credit Card
- As we mentioned earlier, maintaining a steady cash flow is the key to running a successful business. Unfortunately, a lot of small businesses fail because they are unable to manage their finances efficiently. A corporate credit card could help with money management and enable smooth business transactions. Therefore, the first thing that you can do to ease cash flows is to apply for a corporate credit card.
- A corporate credit card allows you to meet expenses today that can be paid for tomorrow. Further, as long as you can pay the credit card bill when it is due, you will be able to avail of this incredible service for free. You only need to pay interest if you don’t pay the bill on time.
- A credit card allows you to delay payment for around one month. This can give your business ample time to generate sufficient inflows to meet the expenditure.
- Further, a corporate credit card also has a higher limit than a personal credit card. You can even avail of credit cards that have a limit of up to ?5 Lakh. Additionally, such a credit card does not affect your finances in any way. You will not be personally liable to meet the expenses of your company’s credit card.
Optimize Salary Distribution
- Having an organized payroll system can help with money management. It has been found that it is much better to pay your employees through a direct deposit in the bank accounts rather than paying through cheques.
- This is because when you pay by direct deposit, you can decide the time when the money leaves your company’s bank account. However, when you pay by cheque, you cannot control when the employee cashes the cheque. This can lead to unforeseen withdrawals which can cause cash flow mismatches and throw unnecessary curveballs into the mix.
- Further, direct deposits also prevent you from making excess withdrawals from the bank account using money that should have been reserved for the cheques that you have issued.
Consider Availing of Loans
- Many small business owners fear that they will fall into a debt trap in case they borrow money for managing their company. However, nothing could be further from the truth. Almost every successful business in India has debt on its books. This is because debt allows you to meet your expenses, while simultaneously investing towards growing your business.
- As a small business, any small disruption can wreak havoc on your capital requirements. One of the biggest lessons of the coronavirus pandemic was that businesses need a steady inflow of cash to operate successfully.
- If you’re in a cash crunch, then you should apply for a Business Loan from your banking partner or a reputed lending institution to meet your expenses without any hassles.
- Usually, Business Loans can be availed by providing minimal documentation and the loan is disbursed within a few days. Eligibility conditions are usually not very strict to ensure that many deserving businesses, irrespective of their size, have access to the financing they require. Credit Success has a systemized process in place to ensure a smooth and easy Business Loan application process.
Further, you don’t even need to provide any collateral to avail of a Business Loan and Business Loan interest rates are highly competitive.
Keep Your Business and Personal Finances Separate
One of the simplest rules of money management is to keep your finances and your business finances separate. This will help you keep track of your expenses accurately, without any confusion or even unnecessary entanglements. This will also prevent you from financing your personal expenses with funds from your business.
Wrapping Up
Effective money management comes with experience. Every experienced business owner knows how much they worried about the finances of their small business before they learned the processes that helped them streamline their business.
Since Business Loan interest rates are quite competitive, consider availing of such loans to help you with cash flow issues that may arise anytime. The process is quite hassle-free and loans are processed and disbursed within a matter of few days only.
