Keeping business finances in order is as vital as maintaining household finances daily. Only then will your company have the health to prosper even in unfavorable scenarios?
Finance in Companies vs. Personal Finance
The first step to the financial health of your business is to separate business finances from personal ones.
The consultant, Marco Fernandes of the agency ProLucro, says that the ability to determine if a company is making profit or losses falls significantly when both finances are mixed.
“Every transaction is essential, and every movement you execute is vital. But when your business transactions are mixed with personal transactions, it becomes more challenging to grow in the direction you are thinking, “the consultant explains.
Control of business finances where private expenses cannot be distinguished from those belonging to the business exposes the entrepreneur to risk making decisions based on inaccurate data and, consequently, dangerous results.
In addition to controlling personal finances, there is a legal issue in this separation. “At some point in your professional career, you will face the possibility of a fiscal audit. However, correct your accounts. Maybe the government may, eventually, inspect your books. At that time, the idea is to find a clear and easy-to-understand record,” adds Fernandes.
If the accounting books are unclear, the employer may have to give numerous explanations, write letters, make official visits, or even pay fines.
How to Control Corporate Finances
In addition to separating personal and business finances, other recommendations will also help you maintain the financial health of your business. “If you follow them correctly, your business will certainly be successful, and the profits will be greater,” says economist Flavio Maluf, who recommends the following:
Get organized
Observe the due dates of invoices and tickets to pay them always in the day. Do not pay interest for lack of organization. Keep your company accounts visible and in a strategic place so you do not forget where they are.
Record entries and exits
Keep a record of all movements, from the simplest to the most complex. You can do this in a book, using a spreadsheet, or with a digital system. The important thing is to keep that daily record.
Difference between fixed and variable costs
Fixed costs are accounts you must pay monthly, such as water, electricity, telephone, payroll, and taxes. Variables depend on the purchase of the month, vary in price, and change or cease to exist. You must know all of them.
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Best billing plan
If you have a client who can’t pay amounts on time and is late in invoices, you need a perfect billing strategy. If you manage small business finances, you are managing cash flow. The reason is to ensure a healthy level of business operations daily. You have to be creative in terms of the bill payment process during the bill amount collection method.
Cash flow issues emerge as excessive cash binds unpaid invoices. Don’t badger with the repeated invoicing and phone calls. In this case, you should try a different way. Then, you will change the term of payment that is 20/10 Net 30. Clients get a 2% discount on the total bill if they pay the invoice within ten days. No matter, the full payment is due in 30 days.
Track your books
If you are working with a bookkeeper, review and monitor your books daily or monthly. It will let you be more attached to the business finances. It also gives you a window into potential financial crime. Don’t ignore leisure time every month on tracking outstanding invoices. Don’t overlook bank reconciliations. Failure becomes necessary when you open the business to wasteful expenses or embezzlement, even with the bookkeeper’s involvement.
Make good financial habits
Review and update financial information by blocking out a decided time while establishing the protocols of internal finance. It can go a long way to protecting the condition of business finance. Keep up with your finances, as it can help you mitigate risk or fraud.
Small business owners always strive to manage time and money as they have inferior technological abilities to a larger extent. But, small business owners should implement and manage internal control.
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