When it Comes to Finances, Small Businesses Should be Using the Same Techniques as Major Corporations
Why financial management is one of your biggest avenues to success
Everything about your business, from what you provide customers, to how successful you are, to your opportunities for growth, revolves around money. One of the biggest mistakes a business owner can make is not properly managing their finances. Small businesses often miss out on profits and growth because they don’t have the same financial tools as big businesses. One thing that all major corporations do that small businesses can also implement is financial management.
Financial management gives you a clear view of how much money your business has, where it comes from, where it goes, what it can do, and how you can make more. Good financial management can show you what products or services of yours are most profitable, what inventory is best for you to purchase, what loans you’re a good candidate for, and which markets you can expand to. Without financial management, you’re in the dark about your business’s current state and its future. Having a basic idea of what financial management entails and how you can implement it puts you on a great path to growing your business.
What goes into financial management?
Budgeting. Budgeting is the best way to know exactly what your money is being spent on. It allows you to track your business expenses, economize when you need to, plan for the future, and ensure you make a profit.
Bookkeeping. Whether you do your own bookkeeping or hire someone, bookkeeping is a critical component of financial management. It is the process of tracking all income and expense transactions and it can help you make better decisions regarding financing, taxes, owner’s draw, and your retirement.
Financial Statements. Financial statements are reports on your business’s financial health and cash flow. Three common statements are; balance sheets, cash flow projections, and profit and loss statements. All three statements will help you manage, maintain, and grow your business. They are also very important when trying to apply for a loan.
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