How to Invest Profits Back Into Your Business

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StrategyDriven Managing Your Finances Article |Invest In Your Business|How to Invest Profits Back Into Your BusinessWhen your business is doing well and you’re turning a profit, you really need to think about how you can turn those profits into something more significant and meaningful. Sure, the cash is good, but what can be done with it to grow the business even further and make its long-term future brighter?

It’s all about investing profits back into the business and looking for the most sensible and sustainable ways of doing exactly that. If it’s not something that you’ve no done much of before and don’t have experience of, don’t worry because we’re going to talk about some of the ideas for how to do it today.

Invest in Time-Saving Software

When businesses start to grow and they have a little more capital at their disposal, one of the things they often focus on is streamlining and time-saving. If your business is not currently running in the most efficient way possible, it’s certainly not too late to do something about that. By looking for time-saving alternatives, such as new software solutions, you can free up the time of your employees and achieve more in other areas.

Create a Cash Buffer

If your business doesn’t yet have any kind of cash buffer in place that you can fall back on, that’s something that you’ll definitely want to take a look at and assess. It might not seem like a big deal right now, but if something were to go wrong in the future and you had an unexpected expense to deal with, it might really hit your business. So having that cash buffer to fall back on is definitely a good idea.

Consider the Best Ways to Invest in Your Team

Investing in your human capital is a good idea as well. A business is only ever as strong as the people working for it, so you want to make sure that you have the best possible team in place and you’re always looking for new ways to invest in their talents or to bring new talent into the fold if you want to grow the team.


Explore New Marketing Strategies

Exploring your new marketing strategies and how they might work for you could be a good use of that money. When you want to get your business noticed by more people, you have to market it in the correct ways; it really is as simple as that. If you’re not always looking for new marketing opportunities and ways of getting noticed by your target customers, you’ll run the risk of falling behind and that’s certainly not what you want to happen.

Upgrade the Equipment You Rely on Most

Investing in new equipment that’ll help your business move in a more positive and efficient direction going forward is never a bad move. When you have equipment that’s getting old, it slows down production or the basic tasks that keep your business ticking over. So if, for example, you need a new plasma cutter and you think that purchase will increase efficiency and you rely on that equipment each day, it might be a good investment to make going forward.

Mergers and Acquisitions

Merging with another business or acquiring a smaller business might not be something that you’ve thought about before, but it can be a good path to take. It helps you to grow the business relatively quickly. Eating up small competition and bringing them into the fold is something that big businesses have been doing for many decades and longer, but you don’t have to be a huge corporation to make the most of the acquisition opportunities that are out there.

Pay Down Existing Debts

If your business still has debt hanging over it, this is something that you’ll definitely want to think about and work on at the earliest opportunity. It’s rarely a good thing to let that debt build up and accrue interest over time. It’s far better to clear the debt at the soonest opportunity you get. So although that might not seem like a way of reinvesting your profits back into the business, it really is because by doing so, you’ll make the business’s financial future much brighter.

As you can see, there are lots of different ways in which you can invest your profits back into the business and help to grow it even further going forward. Be sure to make the most of the tips and ideas we’ve shared here today if you intend to give your business the best shot at success moving forward.

Tips for Improving Your Business’s Financial Reporting

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StrategyDriven Managing Your Finances Article |Financial Reporting|Tips for Improving Your Business's Financial ReportingInaccurate financial reporting doesn’t only make your business look substandard to key stakeholders and investors, but it can also lead to a loss in finances and attract the attention of certain regulatory bodies. Several factors affect the standard of financial reporting, like old systems, poor security, and inadequate communication. However, here are seven suggestions to improve your company’s financial reporting.

Large Data Analytics

The capability of analytics is helping make large data manageable in companies worldwide. In finance — which mainly focuses on data from several sources — analytics would make a huge difference when dealing with your business’s data, and eventually result in more intelligent reports.

Cloud Storage

Cloud storage is easy to use and free if you utilize programs such as Dropbox or Google Drive. However, you could always pay for additional storage. Storing your information in the cloud allows everyone to easily access and share documents.

Integrate Your Information

Due to the importance of your business’s financial statements, it is advisable to have one final file that would serve as the endpoint for every data in the reporting cycle. This file should only be accessed by someone with total accountability and this individual must be responsible for checking whether this data is accurate or not.

Accept Technology

These days, finance is tech-driven, and the businesses that can efficiently adopt and utilize leading technology will have the advantage over others. Find time to update yourself on the most recent financial systems and software.


Make Your Employees Accountable

People are the leading factor that affects the standard of financial reporting. Managers must ensure that their employees are delivering at the highest quality, by regularly analyzing financial reports ethically and accurately. Improving transparency can also result in better work quality because accountability encourages employees to perform more efficiently.

Work In Unison With Other Sectors

All sectors in a company are involved when it comes to financial reporting, though not all sectors generate income, each sector has costs linked with them. Ensuring optimal collaboration between every sector will result in more comprehensive financial reporting. By developing a strong collaboration between your employees, you can emphasize how accurate proper financial reporting is.

Safeguard Your Data

Safeguarding your information is important in maintaining the validity of your financial data. As the world becomes more technologically inclined, cybersecurity becomes a bigger concern. Even major tech companies suffer from hacks and data theft. Businesses of all sizes must ensure to set up cybersecurity protocols.

Utilize Data Visualization to Get Insights

Data visualization is becoming a necessity with investors, the board, and senior managers increasingly waiting for finance to deliver actionable insights which would drive businesses forward. Data visualization utilizes diagrams, maps, charts, and additional visual elements to give a clear story of what’s going on past the numbers.

By prioritizing your people, systems, and the security of your data, you can significantly increase the standard of your company’s financial reporting. Always ensure to use the tools at your disposal, including programs and technologies. And if you are having a hard time running your business, you could always get a virtual CFO.

Small Business Guide: Is Cash Flow Different From Profit?

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StrategyDriven Managing Your Finances Article |Cash flow|Small Business Guide: Is Cash Flow Different From Profit?Both cash flow and profit are essential to all businesses, regardless of size. Even though most people use them synonymously, they are entirely different entities. Business owners need to understand the difference between both metrics to optimize their business’s financial health and performance.

Before investors invest money into a startup, they study the company’s cash flow and profit to determine if it is a sound long-term investment or a place they can make passive income in the short term. These metrics also guide business owners when they make critical business decisions.

What Is Cash Flow?

Cash flow is the movement of cash in and out of a business at any time. For a business to operate optimally, it needs to spend money. These expenses usually include running costs, taxes, inventory purchases, employee wages, rent, office lease payments, loan repayments, and so on. Businesses are built to make money, so cash is expected to come in if the company runs as expected.

When a business receives more money than it spends, that is positive cash flow. If it spends more than it receives, that is negative cash flow. Cash flow management is needed for small businesses to survive. If not, they will spend their way into bankruptcy. There are three types of cash flow;

1. Operating Cash Flow

This is the net cash inflow from everyday business activities. This metric should stay positive to keep a small business growing.

2. Investing Cash Flow

This is the net cash flow generated from a business’s investment activities. This usually includes property investments, vehicle purchases, asset sales, and stock market investments. Cash outflow should be positive for a small business that actively invests revenue back into the business.

3. Financing Cash Flow

This is the cash flow between a business, its creditors, investors, and owners. It is used to offset debts, pay royalties, and dividends.


What Is Profit?

Profit is the cash that remains after a business has deducted its expenses from its total revenue. The profits of a small business are usually given to the business owner and shareholders or put back into the company. A business’s tax is calculated based on its profits, not revenue.

Similar to cash flow, profits can either be positive or negative. If negative, the company is losing money by spending more overall than they make. If positive, then it is making more than it spends. There are three types of profits:

1. Gross Profit

This is the profit a business realizes after deducting the cost of producing the goods sold to generate its revenue.

2. Operating Profit

This is the profit a business gets from its regular operations. Money spent on tax, loan repayments, rent, and income from areas outside the core business is not accounted for here.

3. Net Profit

This is all the profit realized after all the expenses have been subtracted from all the income.

Endnote

Cash flow is different from profit because cash flow does not give a clear picture of the overall financial health of a business. However, it is necessary to provide cash that would be spent on day-to-day operations, wages, and so on. On the other hand, profit is the primary goal of a business. It is not always represented by cash.

An increase in asset and property value also counts as profit. It is hard to say which of the two is more important because every business has different circumstances. Regardless, small businesses must maintain healthy cash flow to keep them running and ensure they make a profit to stay operational long-term.

Choosing the Right Bank

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StrategyDriven Managing Your Finances Article | Choosing the Right BankChoosing the right bank to help manage your finances can be difficult. With so many local and national bank chains, the options from which to choose can be seemingly endless. However, with just a few simple steps, you can be much closer to choosing the right bank for you.

Step 1: Decide What Account Type(s) You Need

The first thing you should decide is what type of accounts you need. Perhaps you simply need a checking account for depositing your paychecks or a savings account to start building your emergency fund. If this is the case, then you can be sure almost any bank you choose will meet your needs.

However, if you are looking for more advanced options such as credit card lines, personal loans and wealth management, you will find your pool of options begins to get smaller.

Step 2: Find Banks Local to You 

While online banking largely eliminates the need to regularly visit the bank in person, it may still be important to visit the bank directly on certain occasions, and depending on where you are located, certain chains may be more or less available. For example, if located in Massachusetts, Kevin Cohee OneUnited Bank could be a great option, but if you are in North Carolina, Well’s Fargo may be more readily accessible.

It is important to note that it is possible to maintain accounts without a local branch, so if you do not care to have a face-to-face option, then finding local banks may not be a priority for you.


Step 3: Consider the Benefits

Depending on the accounts you choose to open, you may enjoy any number of complimentary benefits. Two of the most popular benefits to look for in choosing a bank are access to a mobile app and not having to pay an annual fee.

Large chains such as PNC or Kevin Cohee OneUnited Bank will offer instant access to all your banking needs, but smaller, local banks may not. In addition, many banks may charge an annual fee to bank with them or may charge a fee for low balances or over-drafting your account. Look for banks that take measures to help you avoid these fees with features such as offering free, customizable account alerts.

At the end of the day, there is no perfect bank, and there is not just one bank that will work for you. So consider these steps to help you make an informed decision, but know that you can always change banks if you find the bank you initially choose ends up not being right for you.

Cost-Effective Tips For Buying A Company Vehicle

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StrategyDriven Managing Your Finances Article |Buying a company vehicle|Cost-Effective Tips For Buying A Company VehiclePurchasing a company vehicle can be very beneficial for your business. With a company car, you can easily make it to appointments and meetings or offer convenient services such as delivery. You can also gain access to various tax benefits. However, purchasing assets for your business can be challenging. Additionally, with 29% of businesses failing due to a lack of capital or cash flow, you must look for the best cost-effective methods to help you buy a car for your business, especially if you’re expanding your small business. So, which cost-effective methods can you employ to help you buy a company car for your business? If that’s a question you’re trying to answer, you’re at the right place! Here are some tips to help you.

1. Consider getting the vehicle on lease

One of the first options you would have to consider is whether it would be better to lease or own a business car. Should you decide to buy a car for your small business, you might need to take out a loan, which you would have to pay later. The disadvantage with loans is that you will still pay back even if the value of your vehicle falls below the amount loaned to you.

With leasing, however, the remaining value at the end of the lease can lower the final cost of the lease. Leasing has become a more popular choice for many small businesses because of its excellent benefits. It helps improve your cash flow, especially since outrightly buying a car can take a substantial hit to your cash flow. It’s also a smarter way to avoid spending money on a depreciating asset, and you can reclaim any costs through corporation tax.


2. Consider purchasing a used vehicle

For many small businesses, especially those in the early growth stages, buying a new car is not the best financial choice. If your business prioritizes function over form, purchasing a used car can help you avoid any upfront costs and depreciation.

However, this doesn’t mean you have to choose a used car immediately over a new one. There are some risks associated with purchasing used cars. Some vehicles might not be in good shape and may only last a year or two before breaking down completely. Therefore, be sure a credible mechanic inspects your preferred used vehicle before purchase. This is to identify any issues and evaluate if buying the used car would be a smart financial move. You can also consider purchasing your used car from a private seller instead of a used car dealer, which can help you negotiate better and save more money.

3. Check its fuel consumption rate

Besides the cost of your vehicle, another thing you must strongly consider is the fuel costs. You will need to refuel your car regularly; otherwise, it will not be able to fully serve its intended purpose. Although you may be unable to avoid fuel prices, purchasing a fuel-efficient car can help you stay on budget. You can also consider purchasing small business fuel cards, which are extremely cost-effective and provide a wide range of services.

4. Consider maintenance and insurance costs

Your expenses don’t stop once you buy a vehicle for your small business. Whether used or new, your business’s car will need yearly maintenance checks to ensure that it’s functioning properly. Annual maintenance checks are extremely useful as you can identify, prevent, and fix any potential major car issues before it gets worse.

It would be best to prepare for insurance costs, as every car should have one. Insurance will save you from major expenses, especially when your vehicle is involved in an accident, stolen, or damaged by weather. Check out the various business vehicle policies that insurance companies have to help make the best choice.

5. Buy a vehicle that fits its purpose

When purchasing a car for your business, you must ensure it is designed to fit its purpose. If you were hauling heavy tools and equipment to different work sites, it would be better to get a pickup truck that can haul heavy materials conveniently. Before you begin your car search, list why you need the vehicle and what features you are looking for. It will narrow your search and make the entire experience less stressful.

Finding the best company car that is affordable is not an entirely easy process, given the wide range of options. But with the right plan and budget, you can find the most cost-effective vehicle that will serve your business best.