Practical Finance Tips for Small Businesses.
Entrepreneurs start their businesses because they have a passion for their idea or they want to add value to the world. Entrepreneurs lose their businesses because they haven’t had support or planned properly.
An article in Your Business Magazine (2018) lists the following reasons for a business failing:
- Poor Planning
- Lack of access to finance (or not enough finance)
- Lack of experience in management
- Lack of financial understanding
- Poor management of stock and cash flow
- Failing to keep personal accounts separate from company accounts.
Four of the 6 items refer to finance and knowing your business numbers. According to Mr Ravi Govender from Standard bank, “The bottom line is that people enter business to make money but are not properly equipped with the knowledge required to manage cash flow in and out of the business. Failing to plan correctly and manage budgets simply leads to errors and business failure” (Your Business Magazine, 2018)
As much as an entrepreneur wants to make a difference, they need money to do it, and more than that, they need to ensure the sustainability of that income through good and bad times. Knowing your business numbers is crucial to your business success.
Here are some tips that you can implement in order to set out on a path of financial success:
Set goals and objectives
Planning will ensure that your dream becomes (and stays) a reality.
Set budgets
Budgets are the guidelines that will help you to achieve the goals that you have listed above. If you want to grow your business, you need to set targets and limit how much you spend.
Look at your numbers regularly and keep control of your costs
A budget would be useless if you didn’t follow it. Monitor your expenditure and income regularly so that you can make adjustments as quickly as possible. The longer you wait the more control you will lose.
Focus on your sales figures, you debtors and cash collection
If your sales figures are dropping, you can’t be spending more money. If you have more people buying on credit (we call them debtors) you will run out of cash. It is important to keep a close eye on the people who owe you money.
Cash is king- promises don’t pay bills
If you can’t pay your suppliers, they will stop supplying you. The same with staff. You can’t build a business on the good intentions of other people. Put processes and controls in place to ensure that people pay you and that you have cash in the bank (not only for today but for the future as well).
Why not have a look at our Becoming Financial Savvy bundle that covers everything you need to know on your journey to financial success! Topics include investing and saving, credit and debt, tax, and more!
View the course page HERE.
References
iHanna. (2015). iHanna’s blog. Retrieved November 09, 2018, from Fab Quote – Alice in Wonderland: http://www.ihanna.nu/blog/2015/01/fab-quote-alice-in-wonderland/
Kountable. (2017). Cash is King. Retrieved November 09, 2018, from Kountable: http://kountable.com.au/cash-is-king-yes-even-at-christmas/
Your Business Magazine. (n.d.). Why South African Businesses have a high failure rate. Retrieved November 09, 2018, from Your Business Magazine: https://bizmag.co.za/sa-businesses-high-failure-rate/
