How to manage your business successfully, is a common question among entrepreneurs. Running a successful business is never easy. One of the biggest challenges every business can face is financial difficulties. That business aspect has no room for error. Even a simple financial mistake can become a major problem for your company. The main issue is that many expenses can come unexpectedly and if you’re not adequately prepared, you’ll end up in debt or worse. Therefore, it’s safe to say that if you want to run a successful business, you’ll have to pay extra heed to finances.
As a matter of fact, 29% of businesses fail due to the lack of proper capital. What’s more, everyone in three businesses gets sued even though they haven’t made a mistake. It can take a lot of resources and funds to battle such claims. That being said, proper business and financial management is simply essential for running a company. Here are a few tips on how to manage your business and finances successfully.
Always have a business plan
Developing a business plan is crucial for business management. It gives you insight into how your business operations should be conducted and it helps you identify key point you need to look out for. A business plan is also a good way to strategize, in order to help your business grow and develop further. When developing a business plan, you need to understand that you must cover all aspects of your company.
For example, a business overview, executive summary, market analysis, competitive analysis, operational planning, sales and marketing and so on. This also includes financial planning for your business, such income statements, cash flow predictions, break-even analysis and so on. Without a proper plan, you’re simply running in blind. That means you’ll end up in trouble before you even begin running a business.
Leverage modern technologies
One thing is for sure, nowadays, technology has in many ways provided means for business to operate more efficiently. It’s still not easy to run a business, but technology can greatly help out when it comes to business management. There are various pieces of software that can help you automate most of the processes and help you manage everyday tasks more effectively. In addition, there are entire business management solutions that aid you in controlling your business operations and improving overall company-wide productivity.
For example, you can implement an enterprise resource planning app (ERP), such as SAP Business One, that can help you manage every business operation ranging from accounting and finances to management and administration. Leveraging modern technologies has become an integral aspect of every business and you shouldn’t miss out on the opportunity to properly grow your business with the help of technology.
Track your cash flow
Positive cash flow is the most important business asset you have and it’s of the utmost importance to always have enough cash on-hand. The main reason cash is so essential is that it’s your most liquid asset. In other words, it allows you to make purchases, payments and investments straight away. For example, having $2000 in cash allows you to pay for something that costs the same instantly. On the other hand, having $2000 worth of equipment, means you have to find a buyer first and hope you’ll get the right price for it. If you have an expense you must pay right away, not having cash on you can lead to even more financial difficulties.
Running out of cash can mean huge financial issues and even business failure, especially if you don’t have any other sources of funding available. As another example, you can have good revenue but still go bankrupt if you run out of cash. For instance, it will take 120 days for you to collect payment from your invoices, which means you’ve made sales and generated revenue. However, during those 120 days, you have expenses to pay, such as taxes, bills, operational costs, employee salaries etc. Without cash, you can’t cover those expenses, which means you can either go into debt or declare bankruptcy.
Manage your legal issues
There are many legal responsibilities you have to take care of in order to secure your business and ensure that it can continue to operate without any difficulties. Many entrepreneurs neglect these important tasks, only to end up in legal and financial troubles later on. A good way to start is to determine if you have all the necessary business licenses and permits required for your business to operate legally.
In addition, make sure to calculate taxes properly, because governments are unforgiving when it comes to missed tax payments. What’s more, obtain all the necessary insurances for your business, such as liability insurance, property insurance, workers compensation and so on. Legal claims can get quite expensive even if you’re not at fault. It’s important to protect yourself and your business, so that you can adequately prepare for any inconveniences that may hurt your budget.
Managing a business demands a lot of work, especially when it comes to managing your finances. You can never accurately predict all the costs and expenses that may come your way. That’s why it’s important to prepare in advance and develop a solid strategy that will help drive your business forward.