Financial Planning Tips for Small Business
Managing the finances of a small business is harder than most people can imagine. At this time, you need discipline and sober financial planning advice from Optima Partners on how to go about. Many of the businesses that never grow to their potential fail because of poor financial planning. Financial planning is an inclusive process and required discipline from the business owner and the staff of the business. This is supposed to be everyone’s responsibility if the business is to achieve its mission and vision.
Financial planning tips
Create a budget
The importance of having a budget can never be over emphasized. It is important to create a budget if you are planning to create your expenditure. Without a budget, it becomes impossible to create accountability and monitor how many is spend within the business.
Just like your personal budget, a business budget is also very important.
For instance, a simple business budget should be divided into four sections. The income, your fixed expenses, variable expenses and also the allowances likely to be spent by your employees. This is a good example of a traditional budget.
Focus on investment
Many people may think that investment is not for businesses, but it is very important for a business to make tangible investments. Just like personal investments, business investments are important to keep the business safe for the rainy days.
Businesses that come investments are likely to survive in the long term compared to a business that does not focus on making the investment. It is the dream of every business owner to grow the business to a multi-national. It is the small investments that you make now that will help you grow in the future.
For any business to grow and expand, it is important to know where the business is coming from and where the business is going. The only way to keep track of the business is through proper record keeping. All the business records should be recorded and organized in a proper manner. The reason why many businesses are lagging behind is that they don’t properly keep their records to know the progress of the business.
Separate business and personal finances
When running a small business, it might be difficult to separate your personal finances with business finances. If you’re continuously taking your personal finances and adding them to the business or vice versa, you might not know the financial capability of your business. It is important to learn how your business can perform on its own.
Cash flow sources for businesses
Cash flow refers to the available cash from an investment activity after receiving all revenues & after payment of all debts. Having sufficient cash on hand help ensure that employee, creditors, and others can be paid on time.
If a business or person doesn’t have ample cash to support its operations fully, it’s said to be in debt or insolvent and a likely candidate for bankruptcy-(if the insolvency continues). The financial statement of a firm’s cash flows is used by financial analysts to measure the firm’s business performance.
Organizations with sufficient cash flow have the ability to invest the money back into the company to generate more profit and cash. Cash flow sources for businesses include
#Cash flow from disposing of off assets-This will make any lender nervous. If your business has decided to take this approach, you need to find out if your assets are no longer required in their current business model, If they’re important to operation activities, what basis is the business leasing the asset , do they contemplate to continue this way or do they simply expect to replace or restore the equipment?
#Cash flow from borrowing funds from someone else-Find out what the business’s overall plan is & when you are supposed to repay the loan. Borrowing long term to solve short-term operating losses is not prudent.
#Cash flow from owner-capital contribution-If the business is short of operating cash flow to service their debts_this might be the source of cash flow you as a borrower would like to see, “coming to the table” to save your business.
#Cash flow from running down cash balances-If the business had excess liquidity-(this is okay when it comes to short-term financing). The reason to have an excellent liquidity is -to have a backup plan just in case of a downturn. You should check to confirm how longer your business can operate this way without creating a cash shortage.
#Issuing of debt & the repayment of debt when debt is given; the business receive cash that requires to be paid at a later date.
#Free cash flow-Free cash flow is that cash that the management can utilize at its discretion. The importance of this cash flow shouldn’t be underestimated. Free cash flow can be used to repurchase debt, retire debt, expand current offerings, pay an additional dividend or create new products.
#Issue of shares-cash is received & ownership is diluted once an organization issue stock. Raising funds by issuing shares isn’t a bad sign, as-long-as the company is growing at an acceptable rate.
How to calculate your income/outcome easier? The same question is being asked by a lot of people out there right now, especially that budgeting and money planning is absolutely vital to anyone of us. We have to make sure that our investments are being used for the right things, and that we are earning enough for the different expenses we have.
There are various ways that are being utilized by people when calculating their profits and expenditures at the same time, but if you are interested to know how to calculate your income/outcome easier and faster, there are only two ways that you have to consider.
Income and Outcome Calculators On-line
One, you can make use of different income and outcome calculators provided on the internet. There is a lot you can find, some are free while others are paid. If you need to calculate quickly, and may do it only once, the use of free calculators online is perfect for you. There is no need to download anything, you just have to input the details of the earnings you have, the sources of it, and their amounts. Also, you have to include the possible expenditures and their amounts as well.
The calculator will be the one to do the checking and will let you have complete results in a short period of time. Though, if you are interested in using it for your regular needs of calculations, investing for paid ones should be greatly considered.
Using Money Calculator Mobile Applications
Second, you can also consider the use of money calculator mobile applications, available in the application market. This is more convenient and ideal to most people, as they can access it while they are on the go! There is no need for you to spend time with your pens and pads anymore.
With the use of tablets or smart phones, it would be a whole lot easier for you to manage your incomes and even your expenditures. You can budget your money while you are doing groceries or even other activities, just by taking out your mobile phone from your pocket and making a few touches.
It is very important for you to keep track of your finances. That would help you in having more efficiency and to avoid debts. Whichever way you choose, make sure to weigh the pros and cons of each according to your lifestyle and always double check in order to be assured. Start on how to calculate your income/outcome easier now!