Money! That's what business is supposed to be all about. So why do so many people in business fail to pay attention to it?
Oh sure, we spend lots of time and effort on how to make money. But most of us hate to deal with the often-unpleasant aspects of how to manage our money.
Money management seems like a topic for big corporations, with millions in sweep accounts and offshore tax shelters and the like.
But most of us in small businesses are lucky if we have enough money in our checking accounts to pay the bills and make payroll. Money matters are either tedious (reconciling bank statements), unpleasant (confronting non-paying clients) or both (preparing our taxes).So we try not to deal with money matters any more than we absolutely have to.
Well, time for an attitude adjustment. What seems like an annoyance now can be a lifesaver later.
Managing your money doesn't have to take a great deal of time, especially if you get in the habit of taking care of a few money matters on a regular basis, such as:
Sending out your bills. This seems obvious, but many entrepreneurs fail to send bills in a timely fashion. Get in the habit of billing immediately when you've delivered a product or service, even if the bill isn't due for 30 days. Make certain you do your billing at least once a month. Remember, the longer you take to send out your invoices, the greater the chance you won't get paid at all.Reviewing your finances regularly. At least once a month, but preferably once a week or quickly every day, look at your overall figures, such as accounts payable, accounts receivable, income statement, checkbook balance, cash flow and credit card balances. Know what's going on with your money.Looking ahead. When looking at your books, don't just look at the present, look at the past and then look toward the future, projecting income and cash flow. Be conservative.Getting a backup source of capital. The best time to get a loan is when you don't need one. So take the time now to get a line of credit from a bank. Even if you spend a few hundred dollars a year and don't use the credit line, it's worth it to have the money available to you in a crunch. Even the most successful business has times when money is tight. Another, more expensive and risky alternative, is a credit card you can use for cash advances. Don't use those unless you really need to.Managing your growth. Growth costs money. Typically, you have an increase in expenses long before you have an increase in income. Plan your growth carefully so you have the financial ability to fund it yourself, get investors or comfortably pay the debt you'll incur.Saving. Every business has income fluctuations. The best way to have cash when you need it is to put some away when you've got it. When you make that huge sale or land that giant client, put a portion of that money into a reserve account. That's hard to do when you want to spend the money on growth or long-delayed purchases, but a reserve account will be there for those months when income lags.
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