Managing finances is an essential part of running a successful business. However, many companies struggle to keep their finances in check due to various reasons, such as lack of financial expertise, inadequate planning, and unexpected expenses.
As a result, they often face financial difficulties and even risk going bankrupt. In this article, we will discuss ten strategies for getting your company’s finances in check and ensuring long-term financial stability. Here’s how today’s top business leaders keep their finances in check and prepare for the unexpected.
1. Create a Budget
The first step in getting your company’s finances in check is creating a budget. A budget is a financial plan that outlines your expected income and expenses for a specific period, usually a year. By creating a budget, you can better track your company’s finances, identify areas where you can cut costs, and make informed decisions about investments.
“To create a budget, start by gathering financial data from the previous year, such as revenue, expenses, and profits,” said Shaun Hinklein, Head of SEO at Ramp, a company that offers business credit cards with EIN only. “Use this data to estimate your expected income and expenses for the coming year, taking into account any anticipated changes, such as new product launches, expansion plans, or changes in the market. Factor in both fixed expenses, such as rent, salaries, and insurance, as well as variable expenses, such as marketing and advertising costs.”
As your budget shapes up, the more confidence you’ll have in everything from business forecasts to strategy development and more.
2. Monitor Your Cash Flow
Cash flow is the movement of money in and out of your business. Monitoring your cash flow is critical to understanding your company’s financial health and avoiding cash shortages. By keeping track of your cash flow, you can identify where you can cut costs, negotiate better terms with suppliers and vendors, and plan for unexpected expenses.
“To monitor your cash flow, create a cash flow statement that outlines your expected cash inflows and outflows for the coming months,” said Matt Masiello, Chief Marketing Officer of BabyBuddha. “This statement should include all sources of income, such as sales revenue and investments, as well as all expenses, such as payroll, rent, and taxes. By comparing your actual cash inflows and outflows to your projections, you can identify any discrepancies and adjust your budget accordingly.”
Always take note of changes in cash flow and try to detect cause-and-effect relationships within your business and external influences. You’ll learn tons about your business and the industry at large when looking more closely at cash flow and connecting dots.
3. Cut Costs
Reducing costs is an effective way to improve your company’s finances. Start by identifying areas where you can cut costs without sacrificing quality or productivity. For example, you could negotiate better terms with suppliers, switch to cheaper alternatives for office supplies, or reduce energy consumption by installing energy-efficient appliances.
“Many businesses face costs that keep them from getting ahead financially, and even small expenses can add up over months and years,” said Sasha Ramani, Associate Director of Corporate Strategy at MPOWER, a company that helps prospective college students find a student loan without cosigner. “Work with accountants to pinpoint what is absolutely necessary to do business and what can potentially be reduced or cut out entirely.”
Another way to cut costs is to reevaluate your staffing needs. Look for ways to streamline operations and eliminate redundancies. Consider outsourcing certain tasks, such as bookkeeping or payroll, to save on staffing costs.
4. Increase Revenue
Increasing revenue is another effective way to improve your company’s finances. Look for ways to expand your customer base, such as launching new products or services, expanding into new markets, or improving your marketing and advertising strategies.
“You can also increase revenue by improving your pricing strategies,” suggested Ryan Rottman, Co-Founder and CEO of OSDB. “Consider offering discounts or incentives to attract new customers or raising prices for existing customers if your products or services are in high demand.”
Boosting revenue is always a big-picture goal, but these small actions can crank up the cash flow sooner than later.
5. Manage Debt
Managing debt is critical to maintaining long-term financial stability. Make sure to keep track of your debts, including interest rates, repayment terms, and due dates. Create a debt repayment plan that prioritizes high-interest debts and accounts with overdue payments.
“Consider consolidating your debts into a single loan with a lower interest rate,” said Alexandre Robicquet, Co-Founder and CEO of Crossing Minds. “This can help you save money on interest and simplify your debt management. You’ll immediately breathe a sigh of relief when you at least have a plan for that debt, and it makes sense with your big-picture business plan.”
Debt repayment can take years, but if business fundamentals are strong, it’s all part of the process.
6. Plan for Taxes
Taxes can be a significant expense for businesses. To avoid unexpected tax bills, plan ahead and make sure you are setting aside enough money to cover your tax obligations. Consult with a tax professional to ensure you’re taking advantage of all available tax deductions and credits.
“The first step in planning for taxes is to understand the taxes that your business is liable for, including income tax, employment taxes, sales taxes, and property taxes,” said Raja Subramanian, GM of Power Wizard.
Keeping accurate financial records is critical for tax planning, as it allows you to track income and expenses, determine tax deductions, and prepare financial statements. This will help you determine how much you need to set aside for taxes. If your business is required to make estimated tax payments, be sure to make them on time to avoid penalties and interest charges.
Consider bringing on dedicated accountants or using programs that automate key processes. Accounting software can help you keep track of your finances, generate financial reports, and ease the tax preparation burden.
7. Invest in Technology
Investing in technology can help you streamline operations, reduce costs, and improve productivity. All these items can add up to a brighter financial future for your company and reduced risk across the board.
“Look for ways to automate tasks, such as bookkeeping, invoicing, and inventory management,” said Jeremy Stanton, President and CEO of Haven House Addiction Treatment, one of the top detox centers in Los Angeles. “Consider using cloud-based software to improve collaboration and accessibility among your team members. By investing in technology, you can also gain valuable insights into your company’s performance through data analysis. ”
Insights are only useful when put into action, of course. This can help you make informed decisions about future investments, product development, and marketing strategies.
8. Maintain Good Relationships With Vendors and Suppliers
Maintaining good relationships with vendors and suppliers can help you negotiate better prices and payment terms. Look for ways to build strong relationships with your vendors and suppliers, such as paying your bills on time, communicating regularly, and providing feedback on their products or services.
“Communication is essential for conducting business successfully, so always keep lines open with your vendors and suppliers,” said Hetal Dodeja, Senior Brand Manager of Avenue B. “Make sure they are aware of any changes in your business, such as changes in demand, production schedule, or pricing. This will help them plan and prepare accordingly. It also helps to be reliable and consistent in your dealings with vendors and suppliers. Pay your bills on time and follow through on your commitments. This will help establish trust and credibility with your vendors.”
By building strong relationships with your vendors and suppliers, you can also ensure a steady supply of materials and goods, reducing the risk of production delays or shortages.
9. Keep a Contingency Fund
Unexpected expenses can quickly derail your company’s finances. To avoid this, keep a contingency fund that you can use for unexpected expenses, such as equipment repairs or legal fees. Aim to save at least three to six months’ worth of expenses in your contingency fund.
“By keeping a contingency fund, you can avoid taking on debt or dipping into your profits to cover unexpected expenses,” said Jason Zhang, CTO of Tapin.GG, a company that supports gamers in their Valorant boosting endeavors. “This can help you maintain long-term financial stability and avoid financial difficulties.”
Having a contingency fund can provide peace of mind and financial security in the event of unforeseen circumstances. It can also help prevent the need to take on debt or make difficult financial decisions in times of crisis.
10. Review and Adjust Your Financial Plan Regularly
Finally, it is important to review and adjust your financial plan regularly. Your business is constantly evolving, and your financial plan should reflect this. Review your budget, cash flow statement, and other financial documents regularly to ensure that you are on track to meet your financial goals.
“Make adjustments to your financial plan as needed, taking into account changes in the market, new investments, or unexpected expenses,” said Derek Flanzraich, Founder and CEO of Ness Well, a company that offers a health credit card that helps people get rewards for their wellness purchases and activities. “By regularly reviewing and adjusting your financial plan, you can ensure long-term financial stability for your company. Speak frequently with your inner circle and avoid the temptation to be stubborn about ideas you’ve personally pushed for. Others can help you see things clearly and make more informed choices.”
The world’s best businesses might have a broad, overarching plan for decades to come, but on a micro level, execs are willing to change tack and work smarter when necessary.
Be a Business Wizard, Starting With Finances
All in all, managing finances is critical to running a successful business. By following these ten strategies for getting your company’s finances in check, you can improve your financial health, reduce costs, and ensure long-term financial stability.
Remember to create a budget, wise up on taxes and cash flow, and review and adjust your financial plan regularly. By taking these steps, you can set your company up for long-term success.
