Professional financial management is essential for the success of any business that is just getting on its feet. Money matters are very crucial since the entire basis of the business is to generate an income. Many small business owners often fail to invest in this crucial part of their business and tend to make losses or end up shutting down altogether. The following are some of the essentials of money management in business:
Open a commercial bank account
Every business should have recognition as an entity on its own. Therefore, you need to open a commercial bank account with the registered name of your business. Do not mix business money with personal money. Choose a small business friendly bank to bank with. You should deposit all the money from the business to this account. This creates a line of credit whereby you can use this bank account to get loans and other forms of financing if need be.
Proper bookkeeping is also very essential. You can either do the bookkeeping or hire an accountant. Even if you choose to do the book keeping by yourself, you still need professional help- when it comes to making tax forms and end year financial statements. You can keep your own books using convenient computer software that makes your work much easier, simply filling in the figures and letting the software do the rest. You can use this software to create invoices, keep track of payable and receivable accounts and track spending as well.
Create and track different payment options
Nowadays, customers can pay for goods and services through so many different ways. They can use checks, debit cards, credit cards or even electronic cash transfer. As a matter of convenience to your clients, you need to avail these different means of payment and track these payments as well. Cash payments are easy because there is no processing time, but when it comes to cards and electronic transfer methods, you need to develop a working system that enables continuous flow of business considering the processing time.
Establish payment terms
You need to have a clear payment terms policy that all your customers and adhere to. One of the crippling challenges that most small businesses face is the friendliness that comes from dealing with a small market and this leads to extending credit to customers who are not worth it. You need to standardize the way customers pay while still offering some form of flexibility to customers who cannot front the full payment. Have written payment terms describing deposits, instalment payments and credit extensions.
One of the necessary evils of running a business is debt collection. When you extend lines of credit to customers, there is always the risk that you will receive late payment or not receive any at all. It is essential to chase these payments because they are a part of the business cash flow. Debt collection is a legal process and you can hire a debt collection professional to help you collect payments from delinquent clients. It is advisable to keep the lines of communication with the customer open. Have a specific set of days after which to call a debt collector. For most businesses, 90 days is an acceptable grace period.
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