Mastering your business’s finances is a critical part of running any successful enterprise.
A sure way to do this is by cultivating healthy financial management habits and working on these on a daily, monthly and quarterly basis, advises Precious Mvulane, GAD Consulting Services’ managing director and author of The Essential Finance Handbook, a guide that help business owners to manage their business’ financial performance.
The benefits of adopting good financial management habits are numerous, not only does it enable you to manage your cash flow, it also empowers business owners to set financial goals. For most new businesses, good financial management can help with securing funding.
According to Mvulane, this is because most funders want to see that a business owner is able to make the most of resources (including funding) and this requires strong administration and financial skills.
Mvulane said in a previous interview: “Entrepreneurs forget that business success is measured by the financial success of the business not by the passion. Passion will help you wake up in the morning and sleep well at night because you are doing what you love. But it will not pay the bills.”
Although the managing of finances continue to be intimidating for many entrepreneurs, it is possible to master if you use the right financial management tools and implement key financial practices.
Here’s Mvulane guide to proper financial management for SMEs.
Financial management tools every entrepreneur should be using
1. Accounting software – for basic accounting tasks such as invoicing, expense tracking, and client/vendor contact management, automation of billing and recurring payments.
2. A payroll management tool – for administration of an employee’s financial records like the salaries, wages, bonuses, deductions, and net pay.
3. An inventory management tool – to generate sales reports, set up automatic low inventory alerts, and manage order packing and shipping.
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Financial practices every entrepreneur should implement
In addition to using the right tools, an important aspect of financial management is implementing proper financial practices and processes. This includes:
1. Recording every transaction
– Record daily how much you earned and spend.
– Keep receipts for everything you spend money on daily basis. Make sure you take pictures of them or photocopy them because the slips generally fade.
– Submit source documents to the accountant weekly or /and back up records using online system.
2. Compiling reports
– Summarise daily transactions into weekly reports.
– Compare and check monthly reports generated by your accountant against your own totals to ensure they are entered correctly, do it by the seventh of the month.
– Read monthly financial reports to understand what they mean and if you don’t understand anything set meetings with the accountant to explain.
3. Continually educating yourself
Read finance books or articles daily. This will help to up your financial knowledge and skills.