To help you avoid financial struggles or even the loss of your business, here are a few money management tips. Don’t neglect this crucial area, especially if you don’t have any previous experience managing money. Remember that making money, not losing it, is the main reason why you’re in business.
Money Management System
You probably don’t want to spend hours doing complicated record keeping, but you need to spend a little time setting up and following a system to manage the money coming in and the money flowing out. This would help you avoid future money management mistakes.
Money management ideas and skills are essential to the success of your business, so it should be one of your top priorities. Here are some basic money management tips that will help make this area easier and more effective:
Money Management Strategies
Software – A money management software program is the easiest way to keep track of your home business finances. You can track all of your checks, schedule payments and create a budget (Quicken by Intuit is ideal for a one or two-person business). Determine your business needs and choose the most appropriate software to match them.
Invoices – Word-processing programs like “Microsoft Word” or “Lotus AmiPro” provide you with templates to create your own invoices.
Business Account – Open one at a bank with your registered DBA. Don’t mix your business money with your personal money. To find a good bank, ask for references from other business owners. Depending on the frequency, you should update all your bank transactions once a week or once a month.
Cash Flow – It’s the lifeblood of your work at home business. To maximize your cash flow, you should collect on services or products when you deliver them. The easiest way to collect the money you are owed is by making credit card payments available to your customers. Occasionally, you may need to extend credit however, check out if your client is credit-worthy, and make a habit of following up on overdue payments without delay.
Create a Budget – A budget is a record of your planned income and planned expenses for a fixed period of time. You plan your finances and then track if you’re operating according to your plan. Compare your planned income and expenses with the actual income and expenses each month. Before making each purchase, ask yourself if it will help you improve your business or set you back. Budgeting is one of the areas that will give you more control over your money.
Cash Reserve – Every business has ups and downs, so you need to protect yourself from the “slow” times. A cash reserve will give you a cushion to survive these tough periods. Depending on your budget, you should have a cash reserve equivalent to at least 2 or 3 months of spending.
Money Management Advice
The management of money boils down to exercising discipline. Either you control the money or the money controls you. Good money management will greatly improve your chances of success. You have many helpful resources and articles online for money management tips to help you on this topic. Best of all, they’re FREE!
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