How to manage finances in a small business? What functions are best left to the owner, and which ones – delegate to the accountant? Let’s also understand why most entrepreneurs are always short of funds.
I want to give you some really practical advice: If you have a small business and your finances are in disarray, this principle is essential.
Best financial management advice
People are very rational about money. Money and numbers are hard to cram. But small business finances can drive an entrepreneur crazy. The reason is that in a disorganized business, managing finances is like a flow, which means every day money comes in, every day you have to make decisions about certain expenses, see random letters and a lot of money. numbers, so you need to understand why you need a w2 form. It is very difficult to manage the flow, there are difficulties to prioritize.
So, my advice is: stop making financial decisions every day.
A financial game that will change your approach to money
Try to play a smart game that will completely change the way you think about money. Its essence is that you only have to make financial decisions once a week. That is, for 7 days the money is deposited in your checking account, but you do not spend a penny. I agree it’s not easy, but a week is easier than a month.
At the end of this period, you will have both money and bills accumulated.
First point: you can finally match them.
Second point: when making a financial decision, forget what to expect tomorrow. Consider that you only have the money you have today. Do not take into account the funds which “arrive tomorrow”, “about to arrive”, it is an abyss.
What is the benefit of playing the game
Once you have played the game, you will discover some interesting things. First, there will be a lot more bills to pay than money to pay. And it is common, otherwise, financial management would not interest you at all! Don’t think there is something wrong with your business; this state of affairs is normal. There are always more needs than opportunities, but this is what pushes us upwards and contributes to our development. Second, it’s only through the game that you’ll start to really prioritize. Yes, for a short time, but it’s a good start.
The first step in financial planning
Adopt this principle as a rule in your financial activity: make decisions only once a week, and no money should be spent without financial decisions. All receipts for this period are on the account, a list of expenses for the week is made (try to account for this amount in one way or another). And, when that doesn’t work, you’ll start to prioritize, think, and make good decisions.
Stay away from trying to manage the cash flow because then you will make huge mistakes. You don’t get a preview, you don’t even see a small financial picture for the week. By stopping allocating funds to the feed, you will be able to see the true image of your business
The bottom line is the perfect picture.
Ideally, the owner should set the rules for managing finances, and managers should follow and monitor them on a daily basis. It’s the best way to go. And moving away from managing the flow will be your first step towards it.
Come have a weekly decision point, your business will “get smarter” on finances. I’m not talking about you and the way you think, but the specific decisions you make and their consequences.