Prudent financial planning and smart money management means that you will be that one step closer to financial success. It can help you avoid money problems later on, cause you stress or force you to put your business on hold (knock on wood). You can counteract this by implementing these money management tips.
Here are the top 5 money management tips that you can apply to your business, to help improve positive cash flow and income coming your way.
1. Create a cash flow budget
One of the best money management tips is to create a cash flow budget. It is up to you and the size of your business on whether you want to create a monthly, quarterly or yearly one. Cash flow projections mean that you are able to plan out how much you are going to spend on different areas of your business while also taking into account the income you are expecting to receive. You can forecast payments so that you know what your budget is and how much you are willing to spend in each area.
You can choose to format your cash flow budget on a spreadsheet, worksheet, or even by hand. Draw up the appropriate columns for your budgets and begin working out your cash flow budget:
Step 1: Take your beginning cash balance
Step 2: Add your budgeted cash inflows
Step 3: Deduct your budgeted cash outflows
2. Reporting of actual cash flow
To ensure that your cash flow budget is working, you need to report the actual cash flow at the end of your forecast. This is where you can see how far off your budget you were, what areas could be improved upon. Ask yourself whether your expectations were reasonable and adjust accordingly.
3. Review and reduce
When you look at your cash flow report, identify areas where you can reduce expenses. Eliminating unnecessary costs is one of the best money management tips because it means that you can save money and not lose anything in the process. Some examples include:
- Turning off computers after hours to save on electricity bills
- Cutting down on staff hours during quiet times
- Don’t bulk buy low volume stock items, especially if it is food or has an expiry date to it. Only buy when necessary
4. Shop around for the best price (but don’t compromise on quality)
Businesses get their items from suppliers. There are many vendors available that will be selling what you want, so shop around for the best price. Another one of those great money management tips is to visit a minimum of three suppliers that all have similar quality and compare the prices. If they are all of the same quality in a similar deal, then go for the cheapest one. You’ll get the same items, but at a lower price.
5. Continue to review and compare your cash flow budget and cash flow report on a regular basis
Don’t just create a projection for the first month or quarterly, and then leave it thinking that it will be the same every time. It is vital that you continuously and consistently review your projections and actual reports because there will be changes within each time period. Some months you will need to add extra costs (such as having to hire more staff during Christmas time) to your budget that are important to include in order to draw up an accurate forecast.
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Money management tips are vital to implement into your business to ensure that you are not spending more than what you should, or need to. By properly planning your cash flow budget and trying to stick to it as close as possible, you will be surprised on just how much you can save. Be money smart, and you can avoid money problems further down the track.