All business owners should have a rudimentary understanding of their company’s basic financial management system. Even if you have a Finance Director it’s important to understand a company’s finances so you can make educated decisions that will help sustain your business and also increase your return on investment. Different companies will have different needs, of course, but there are a few accounting related tips that all Chief Executive Officers can benefit from knowing.
Plan Ahead
When businesses are just starting out they may only be able to focus on the first year of their operations – or perhaps even the first few months in some cases. However, as soon as you can start planning 5 – 10 years out you’ll be moving in the right direction. Running a business is not cheap, and you want to make sure you have the financial resources you need to support your business well into the future. For example, if you know you’ll need to make a large capital expense in two years you should start putting money away for it now. Set up an automatic monthly transfer of funds into a savings account so when it comes time to make the purchase you’re not scrambling for money or running up credit card debt.
Utilize Specialized Software
Although some small businesses may only need basic accounting software to track their revenue and expenditures, some businesses may require specialized software. Restaurants often need their own customized software because their revenue stream consists of small, individual customer bills and they have constant food bill expenses required to keep running. Another example is government fund accounting software. Because government funding often has very specific criteria that needs to be tracked in order to ensure funding it’s a good idea to explore your available options. Some government grant recipients are required to provide customized reports, it’s a good idea to have a program that supports government-specific record keeping.
Invest in Growth Opportunities
If your business is turning a profit it can be easy to maintain the status quo and continue operating in the same fashion. If you’re interested in expanding operations, though, it’s a good idea to make investments in growth opportunities. Whether it’s a new program offering or a second store, expanding your business can increase your profits tremendously. A second bakery on the opposite end of town, for example, might double your profit margin after the initial start-up costs are paid.
Spread Your Tax Payments Out
It can be difficult for some companies to have enough reserves to make large quarterly tax payments. You can always choose to make monthly tax payments instead. If you pay each month it can be treated like all of your other normal monthly expenditures.
Managing business expenses is never easy, but here are a couple of ways you can make it more manageable.
