Get Your Finances in Order to Ensure Success and Growth

use your marketing budget effectively

According to a recent study, experts attribute 80% of business failures to poor money management; insufficient cash flow to cover immediate needs, rather than insufficient revenue. This is due to the simple fact that there is only so long a business can stay afloat juggling to pay bills and meet payroll – no matter how strong their business idea and how much revenue they generate. After all, there are many costs associated with running a business, from employee salaries to taxes and you can only put off paying for things so long before you just can’t operate anymore. Here, we discuss how to get your finances in order to ensure you can succeed and generate income to sustain your growth.

finances in order
Getting your finances in order

A healthy balance sheet allows your business to grow with the excess assets generated by your business. Generating income is a good start, but you need to manage the money you make wisely to keep your finances in order. Here are some tips on managing your money.

1. Build a financial plan

As with anything else in business, building a financial plan based on solid forecasts is your starting point. If you’re a startup, developing these forecasts is never easy. However, the Small Business Administration (US SBA) has some resources designed to help you get started and you’ll find online resources showing aggregate financial data for your industry, such as anticipated growth, as well as averages for businesses in your industry that you can use to build forecasts and, later, as a benchmark to evaluate your performance.

This financial plan must include not only forecasted sales and expenses but a forecast of cash flow. As mentioned, more businesses fail because they don’t have sufficient cash flow than fail due to sales issues. These pro forma statements and the budgets emanating from the statements are critical for getting your finances in order. Build in a buffer of at least 3 months of operating expenses for emergencies or unexpected events.

use your marketing budget effectively

2. Maintain accurate records

When running a business, spreadsheets will become your best friend – as they are the easiest way to keep track of your spending and revenue. While it may seem like a bit of a hassle, keeping thorough financial records is the key to success as it gives you a clear insight into your spending habits and earnings. You need these records not only to manage the financial aspects of the business, but they’ll also help you when it comes time to build the pro forma statements for next year. They’re also useful whenever tax season rolls around, as you won’t have to search for old invoices and receipts.

A helpful use for these records involves creating variances. You create variances by subtracting the actual expenses from budgeted expenses. This saves time and mental effort in understanding your finances by allowing you to focus on those items with large variances, especially negative variances. In some cases, these variances were unavoidable and are useful in constructing forecasts for the coming year. In other cases, they represent waste and inefficiency. You must develop plans to avoid these variances next year.

Making financial decisions is difficult at the best of times but these decisions are impossible without accurate and complete financial records. After all, your business is not only your livelihood – but you’ll likely have a team of employees working for you whose own financial situation rest on your company’s success. As a result, it’s important that you employ or contract with 3rd parties to maintain your records. It’s best to bring in an accountant and potentially a financial advisor who can maintain your records and offer advice. They can also help save money for your business by identifying any mistakes you may be making and putting plans in place to rectify them.

3. Include growth as a normal expense

If you don’t plan and budget for growth, your business won’t grow. If you don’t allocate funds for key elements contributing to growth such as marketing and new product development, instead only investing in these critical components when you have surplus funds, is a recipe for disaster. Check out industry benchmarks but you’ll find that dedicating a budget of around 10-15% of your budget works in most industries.

achieve success
Image courtesy of Creative Onl

Don’t forget that your marketing budget must include not only advertising but customer service and research as well as trained marketing staff.

4. Pay your bills on time

Learning how to keep on top of your invoices is essential to improving your company’s cash flow. However, with invoices sent out daily, these tasks can prove troublesome for many. Thankfully, there are various solutions that you can use to tackle this problem. For example, software that automates and tracks invoices is perhaps the best payment optimization solution as the software does a lot of the heavy lifting on your behalf. This can also save you a great deal of time and money by giving you the chance to focus your energy elsewhere.

Suppliers and other vendors might offer a discount for paying your invoice early. For instance, upstream partners often offer a 2% discount if you pay your invoice within ten days. Those discounts can really add up, so try managing your money so you can take advantage of the discounts.

5. Collect accounts receivable

The same is true for collecting from people and businesses that own you money. If you find accounts receivable dragging on, you might consider a means to deal with these late payers or delinquent accounts. Like every business, I find some clients are late paying their bills and some don’t pay at all. For those paying late, I shut off their services and charge a small fee to restore them. For those that are seriously delinquent, I simply fire them. You don’t have to choose my options but you should establish a policy and administer it fairly.

Sometimes, you really need your money now. If you have accounts receivable from good customers, you may find a financial institution willing to factor your accounts. Factoring provides your money now, at a discount over the full amount. When paid, the financial institution takes the money.

To help customers avoid late payments or the need for factoring accounts receivable, consider offering various payment options. You can improve your cash flow throughout your company by making it as easy as possible for your clients/customers to pay you. For example, while cash payments are often the preferred method of payment, many customers now prefer to pay online due to the convenience it offers. As a result, you should ensure that you provide your customers with plenty of different options when it comes to making payments. That includes accepting various credit cards, 3rd party payment platforms like PayPal, and even accepting cryptocurrency as payment.

cryptocurrency
Image courtesy of Money Control

6. Find ways to cut your costs

Cutting down the costs associated with running your business is another excellent way you can ensure your financial future is bright. After all, the lower your expenses, the bigger your profit! Again, there are plenty of ways you can cut costs to increase profits. For example, instead of renting out office space, you could allow your employees to work from home. Alternatively, you could try to negotiate better deals with your current suppliers or look elsewhere to see if you can get a better deal.

Conclusion

These are just a few tips to help you get your finances in order. I hope you found these tips valuable.

Need marketing help to support business growth?

We welcome the opportunity to show you how we can make your marketing SIZZLE with our data-driven, results-oriented marketing strategies.  Sign up for our FREE newsletter, get our FREE guide to creating an awesome website, or contact us for more information on hiring us.

Hausman and Associates, the publisher of MKT Maven, is a full-service marketing agency operating at the intersection of marketing and digital media. Check out our full range of services.