Financial success in business is dependent upon budgeting, planning and forecasting. Understanding money management and its impact on your business will prepare you for financial success. Here are 10 helpful methods to help you reach financial success in business:
Budgeting for both personal and business expenses can be challenging at times but is necessary. Many business owners will make the mistake of not preparing their budgets properly and will overlook key important factors that attribute to starting, and maintaining a business. Create a budget for both your personal and business expenses. Your budget should include both fixed and unexpected expenses. Questions to consider when preparing your budget: Do you plan on hiring employees? Do you need to hire staff on a part time or full time basis? How often does your store restock items? Is there seasonal “down time” in your industry? If so, how much money do you need to set aside to prepare for the “down season”?
Financial planning and forecasting
Once your business is at the growth stage, meaning you have a steady flow of income and customers, create a business model for financial planning and forecasting. An example would be:
50% revenue on expenses such as payroll, supplies, office or retail space
30% of revenue on building your business, such as expansion, recruiting
20% of revenue on future, developing new products and services
Pay attention to your sales cycles
Sales cycles consists of a period in your business when you’re slow and when you’re busy. You may need to adjust your prices to prepare for the “off season” or add an additional service or product to help increase your cash flow
Set the tone for payment expectations. Put a billing cycle in place to help you keep up with payments but to set the tone for when payments are due. For example, any customer that purchases a products or service by the 5th of the month, start their billing cycles on the 5th of the following month. If a customer purchases items from the 10th through the 25th, then their next payment should be due on or during the same time period in the following month. Keep your billing cycles consistent. This will help you monitor and track payments along with outstanding balances.
To communicate your payment process effectively, have the information of what the payment process is visible in your shop, on your website, your receipts, and via email. Establish you company’s policies which includes refunds, returns, exchanges and payment cycles.
Many business owners make costly mistakes with sending out invoices and not properly following up on them. Invest in an electronic invoicing system to help you track payments including delinquent accounts. You can start off with using your email however as business picks up, you may need to invest in a system that will help stream line your process.
Create a Cash Flow Strategy
C.R.E.A.M Cash rules everything around me! Wu Tang was on to something with this one! Cash rules your business that’s for sure! Cash flow is the life line of your business! Don’t be fooled by the rapid growth and increased sales! Most businesses will look at a fast-growing company as a “sign” that cash flow isn’t an issue and will never be, based on the success of the business. Its best practice to create a “cash flow analysis”. Cash Flow is the movement of money in and out of your business. An effective cash flow analysis will help you to effectively manage, maintain and operate your business.
3 Ways to generate Cash Flow in your business
Repackage products or services
A great way to introduce or to upgrade your products or services is with repackaging them. For example, if you offer courses, include an eBook with the course along with helpful templates.
Partner with other brands
Strategic partnerships helps build fruitful collaborations. Today’s brands are aligning themselves with one another to gain exposure to a market they normally wouldn’t have had access to.
Consult your services
Offer your level of expertise as a consultant. Consulting is such a broad industry that can lead to success especially if you’re a niche consulting firm.
Budgeting and money management are key essentials to financial success. Financial planning and forecasting will help you grow and sustain your business. Having a cash flow strategy in place will help you generate cash flow. For an in depth look into how you can prepare your business for financial success purchase The Fundamentals of Budgeting and Money Management Ebook