Tips for Managing the Finances of Your Business

Did you know that within the first five years, the majority of small businesses fail? Business owners can seek plenty of explanations for why this might happen to their company, but the answer always comes back to one factor: money. CFO’s recent studies in small businesses show that 82% of companies fail due to poor cash flow organization and a poor understanding of money management in general.

As a business owner, it should always be a top priority to understand every factor affecting your finances and to keep your finances organized and well-planned. In order to launch a successful startup business or keep a well-established company on track for growth, business owners must implement certain strategies to better manage the company’s finances. Otherwise, it is virtually impossible to navigate the economy and industry competition without a solid financial structure in place.

Separate Your Accounts

One important tip for managing finances is to keep business and personal accounts separate. It is extremely difficult to track the transactions of a company if some are on a personal credit card and others are on a business card. This way, business owners can be in complete control of tracking the company’s outlays and know exactly how much money employees are spending.

Plus, it’s much easier to keep track of business or personal loans you may have, if they are managed through separate, designated accounts. If you are utilizing loans to cover operational expenses or ongoing purchases, it is wise to have a separate account for that money rather than keeping it in the company’s primary business account. This will prevent overspending and overextending the money, and it will also make the entire process more organized.

Strive to Cut Your Costs

Especially if your business is relatively new, it is important for owners to strive to cut costs and even penny-pinch in order to promote growth and expansion. Every business handles two different types of costs: fixed and variable. While fixed costs must be accounted for even if your business is not making any money, variable costs can oftentimes be cut for the sake of saving money.

For instance, instead of buying costly digital marketing software, you could choose to work with free, Cloud-based software that performs the same functions. Or, instead of traveling long distances by car to meetings, you could conduct video calls with your clients. By cutting these certain variable costs, you can better manage your company’s finances and stay focused on profitability.

By separating your accounts and striving to cut costs, business owners can keep their finances in check and promote new financial strategies within the company that bring about growth and expansion.