How To Maximize Your Businesses Financial Success

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StrategyDriven Managing Your Finances Article |Financial Success|How To Maximize Your Businesses Financial SuccessAny business will likely be aiming for greater financial success. No matter whether you own a small business or a large corporation, there are simple and effective ways of maximizing your businesses financial future. If you are under-educated on finances and are often stuck on how to maximize your business budget or profits, here are some top tips.

Make future projections

Projecting the future of your business will mean that you have a desire to achieve success. When you plan well, you will likely be able to attain greater financial profit and success. If you lack projection knowledge, using a pro forma balance sheet will help you project your business financial future. You can dictate where you will spend your money and what profits you envision.

Without future projections, you may not know where and how is best to spend your budget. You might spend money on the wrong things and become unstuck when you have no budget left to spend on what’s important. You will be able to look at your businesses current assets and forecast their financial future.

Be savvy with your budget

Your budget will dictate how far your finances will stretch. Additionally, it will also forecast the profit ratio you could make.

If you allow your business to have a big monthly spending budget, then you might overspend and attain a reduced profit. However, if you are strict with your budget and are savvy with money, you will have a greater chance of attaining more profit.

The savvier you are with budgeting, the greater your profits will be, which will lead to greater financial success.

Track your spending

Alongside budgeting, it will also benefit to track your spending. If you manage to track spending on a daily basis, then you will have a better chance of curbing bad habits and ensure that you spend your budget wisely.

Tracking your spending will allow you to acknowledge where you are overspending. You might not realize how much casual lunches cost your business. When you monitor your cash, you will be able to see where you can save, which will help you maintain a greater profit. When you manage to curb habits and track your spending effectively, you will likely be able to achieve increased profits.

As well as daily tracking, you should ensure that you do monthly office checks and correlate your spending against your profit to ensure that you are making as much profit as possible.

Ensure customers pay you on time

Ensuring that your customers pay you on time will help your business control its finances. If payments are delayed, it will hinder your monthly profits and not look great on your accounts.

To ensure that customers pay on time, you should have a contract that states a deadline. If the payment is missed, then a penalty should occur.

Meet tax deadlines

As well as your customers needing to meet deadlines, your business does too. You will need to be aware of tax deadlines so that you can avoid penalty charges. If your business fails to meet such financial deadlines, it could result in debt.

Your company may not be able to afford the debt, which will have a significant impact on finances. It may even result in stopping production and putting the business on hold.

Control stock

Most businesses will have hold of stock. Having it under control will mean that you have enough stock to maintain your business.

Whether you overbuy or underbuy stock, it will affect your business. You won’t want to overspend and be left with stock for months on end that won’t sell. Similarly, if you lack enough stock, you won’t be able to satisfy every customer, which could leave them losing interest in your business. You won’t want to lose customers as it can have a significant impact on your business.

Get the right funding

Every business will likely need funding to start up. Small businesses may require overdrafts, which can help in case of emergencies. Furthermore, large corporations may need funding for maintaining their staff capacity.

Either way, getting the right funding will ensure that your finances are reliable. You won’t want to go into an unplanned overdraft and incur a charge.

Deal with problems straight away

If you have any financial problems arise, it is best to deal with them straight away. If you have the money to pay the fee or penalty, then you should fulfil it as soon as possible. The longer you leave it, the more chance you might incur extra fees, which your company might not be able to afford.

Although problems can reduce your profits, dealing with them straight away will ensure you do not go into debt. You will be able to maximize your finances and get back on track sooner.

Increase customer referrals

Your customers and their business to you are how you gain profit. Without regular customers, you may not achieve any profit. Thus, ensuring that they are satisfied will aid in maximizing your businesses finances.

If you satisfy your customers, then they will likely continue to use your business. They will spend more money or more regularly, which will help your finances. Furthermore, if they refer your business to other friends and family, then you will gain more customers, which will help you increase profits even further.

Although it might feel daunting asking your customers to refer you, they will likely agree too. If they love using your business, then they will likely want their friends and family to attain the same experience. You could ask them to promote you through word of mouth or simply ask them to leave a review, which will look great for other new customers. Customer testimonials can be promoted online through your social media or website for new customers to see.

To maximize your business financial success, use these top tips. It can be as simple as budgeting and dealing with financial problems on the day to increase profits and reduce the risk of debt.

Cutting Your Business Costs: Top Tips

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StrategyDriven Managing Your Finances Article |Business Costs|Cutting Your Business Costs: Top TipsEven with less costly technology and marketing tools, it costs money to run a firm, and those expenses rise regularly. You must keep your expenses under control to maintain your profits. Here are some strategies to cut costs and increase your bottom line in your business.

Lower your workspace costs

Depending on the health of the commercial real estate market in your area, you may be able to take advantage of low office space rates to relocate your company or negotiate better lease terms with your current landlord.

If you do not need to conduct your business from a commercial location, even better. Why not run your business from your home or on the go?

If this is not possible, look at other ways that you can save money. Can you downsize your commercial property? Can you look at lowering your bills by installing insulation from www.insofast.com? Can you talk to your landlord about switching energy and utility suppliers if there are cheaper options available?

Reduce staffing costs

If at all feasible, involve family members in your business. Your partner could be willing to take on a business responsibility, saving you the cost of employing someone else.

If you have children of a suitable age, why not involve them in your business as much as possible? For young people, learning about business is a fantastic experience that keeps money in the family.

Another approach to save on staff expenses, depending on your business, is to engage contract workers or freelancers, who save on taxes and other employee-related expenses. Just make sure you follow the IRS rules for determining who is a contractor and who is an employee.

Lower vehicle expenses

If you own or operate a service or contracting company that requires a vehicle, you are probably well aware of how vehicle costs might affect your bottom line. Larger vehicles, such as vans and crew cabs, might have exorbitant fuel and maintenance expenditures.

How can you lower your transportation expenses other than limiting business vehicle use to only essential travel?

If you have a lot of miles on your business vehicle(s), cutting down on fuel consumption is critical. Diesel and hybrid vehicles are more expensive to buy at first, but they can save you money on gas and maintenance in the long run. Because modern trucks use more advanced materials to cut weight and improve efficiency, it might be worth turning in your gas guzzler for a more fuel-efficient vehicle.

If your company is just getting started or your budget is limited, leasing a car offers many benefits, including fixed monthly expenses, the flexibility to return the vehicle at the end of the lease period, and the elimination of depreciation and maintenance expenditures. If it makes sense, most leasing businesses offer lease-purchase arrangements, which allow you to buy the car at the end of the lease term.

These are just a few of the ways that you can cut your business costs and raise your bottom line. What are your tips?

How To Finance Business Growth

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StrategyDriven Managing Your Finances Article |Finance Business Growth|How To Finance Business GrowthYou can start and grow a business with very little money. In many cases, however, you will be able to grow your business more quickly if you can invest in its growth. With that in mind here are five options to consider for financing business growth.

Barter with other businesses

Bartering may sound old-fashioned. In actual fact, however, it’s very much alive and well and can work brilliantly for businesses. The key to successful bartering is to know the value of what you’re offering and make sure that you’re getting something of (approximately) equal value in return. This does usually involve some trust so it tends to work best with businesses you know.

Monetize your business assets

In the real world, bartering is good but it will generally only take you so far. Ideally, you want actual cash income. You may be able to get more of this by monetizing what you already have. For example, if you have real-world space, you may be able to sub-let (some of) it at least some of the time without it negatively impacting your business.

If you’re operating purely in the cloud, then make sure you monitor your real-world usage carefully. Act promptly to scale your resources up or down. This ensures that you are always paying for exactly what you use. Remember, a cent saved buys as much as a cent earned.

Apply for grants

This one can be hit or miss but if you hit it’s often free (or very affordable) money. It’s therefore always worth keeping your eyes open for business grants. Businesses that can demonstrate some level of social responsibility often get priority for these. Similarly, grants are frequently offered in line with general aims, for example helping businesses to be more sustainable.

Get business credit

The key to getting business credit is to work on the assumption that you’re going to need it. If it turns out you don’t, then your preparations will have benefitted you anyway. If it turns out you do, your preparations will benefit you even more. Preparation number one is to polish your credit record to a fine shine.

As soon as your credit record allows, get a small amount of business credit, like a business credit card with a low limit. Use it regularly and responsibly. This will keep pushing the needle on your credit score in the right direction.

Invest for your business

There are two ways you can do this. One is to invest personally but to divert (part of) your profits to your business. The other is to have your business own its own investments (assuming you’re incorporated). You could use a combination of both.

In either case, there are two key points to keep in mind. Firstly, you need to act mindfully. This means that your investment strategy has to be tailored to your goals. For example, is your aim to maximize capital growth or to maximize dividend income?

Secondly, your choice of trading platform does matter so do your research before you pick one. FXGlobe reviews are a good place to start. Fees are (very important) but so is the user experience. This includes security both in terms of regulation and in terms of cybersecurity.

How to Build Your First Balance Sheet as a Startup?

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StrategyDriven Managing Your Finances Article |Balance Sheet|How to Build Your First Balance Sheet as a Startup?If there is one area of your startup that requires maximum attention to detail, it is the financial aspect. No successful business attained the height it has reached by neglecting the details of its financial activity.

Having a detailed financial system in place helps to increase transparency and accountability within the business environment. It also helps to know whether there is a loss or profit and the reasons for such. Most importantly, a detailed report of your startup’s financial activity over a definite period will come in handy when reaching out to investors.

One of three documents that your startup has to draw up every year is its balance sheet. Here, we shall be examining a balance sheet, what it includes, and how to build your first as a startup. Let’s start with what a balance sheet is and what it should include.

A balance sheet is an accounting document where both the credit and debit sides are balanced.

What Should Be On A Startup Balance Sheet

A balance sheet is a comprehensive financial document that examines all the assets, liabilities, and shareholder’s equity that belongs to a startup and how they were used within a financial period.

It provides an analysis of credits and debits and what every penny was used to achieve. If carefully drafted, it is expected that both ends of the balance sheet, which are the debit and credit sides, should be balanced after every calculation has been made.

From the above, you can see that there are three main components of a startup’s balance sheet, and they include:

Assets

Assets here can be current or non-current assets, and they include everything that the startup owns within a given period. Assets can be tangible, which refers to those assets that can be seen and touched like properties.

A startup can also have intangible assets that you cannot feel or touch, like goodwill. Every business should identify its assets and why these assets were obtained.

Liabilities

While assets are those things a company owns, liabilities are those things a company owes. Liabilities can also be current or non-current liabilities. Startups need to know what they have as assets and what their liabilities include.

Shareholder’s equity

Shareholder’s equity refers to what is left when a company has paid off its liabilities. It is the remainder of assets after liabilities have been settled.

A well-drafted balance sheet should have these three concepts captured accurately in it.

When A Balance Sheet Is Not Balanced

The whole essence of a balance sheet is that the debit and credit sides should be balanced at the end of every calculation. However, there are instances where after all the entries, the balance sheet won’t be balanced.

You may notice an imbalance after every entry has been inputted, and you are wondering what is the cause.

Some of the factors that can be responsible for a balance sheet not being balanced include:

  • Incorrect or incomplete data
  • Wrongly entered details
  • Mistakes in exchange rates
  • Mistakes in inventory
  • Wrong calculations

After imputing the details, review the sheet again.

Building Your First Balance Sheet as a Startup

As a business owner, you don’t have to wait until you own a big business before building your balance sheet. Immediately after your startup launches, you should start putting steps in place to draw up a balance sheet.

Your first balance sheet may not be as perfect as subsequent ones. It is possible that, in the end, the balance sheet may not be balanced. Instead of getting worried, you can review it to check if any of the factors listed above are responsible for why it isn’t balanced.

To build a perfect first balance sheet as a startup, here are some vital steps to follow:

Set a report date and range

A balance sheet is not an indefinite document. Like every other accounting document, it is expected to cover a specific range. So, your first step to building a balance sheet for your startup is to set a report date and range.

Conventionally, a balance sheet is to be drawn up every year. However, some businesses have chosen to make theirs after every quarter or the first half of the year. Regardless of which of these options you are going for, setting a report date and range is necessary.

A good example of this is to have a balance sheet from 1st January 2021 to 30th June 2021.

Identify your assets and liabilities

After you have set a report date and range, the next step is to identify your assets and liabilities. It is impossible to build a balance sheet when you don’t have a comprehensive idea of what you own and owe.

Determine your shareholder’s equity

As earlier pointed out, your shareholder’s equity is what is left after you just have subtracted what you owe from what you own. If you can successfully identify your assets and liabilities, determining your shareholder’s equity will become easy.
Worthy of note is assets and liabilities identified, and shareholder’s equity determined must be within the range fixed when starting this process.

Carefully enter the details

All the steps that have been discussed above are geared towards ensuring you have the correct statistics. With all these statistics at your disposal, the next step is to enter the details into the sheet. In doing this, you have to ensure they are correctly entered.

Pay attention to all the data to be sure they are complete and reflect the current state of the startup. Avoid mistakes in exchange rates and inventories.

Conclusion

The process of building your first balance sheet as a startup is not as complicated as you might have thought it to be. Provided you understand a balance sheet, the purpose it serves and can follow through on the steps provided above, you can create one in no time.

However, where it appears that after several trials, you’re not getting the right results, you can seek the guidance of a financial expert to guide you through the process. You can also surf the internet for more information from professionals on building a balance sheet.

References
CFI: What is a Financial System?
HBS: HOW TO PREPARE A BALANCE SHEET: 5 STEPS FOR BEGINNERS
Wallstreet Mojo: Difference Between Current and Non-Current Assets
Dummies: Current and Noncurrent Liabilities on the Balance Sheet
Chron: How to Review an Unbalanced Balance Sheet

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How To Offset Cost Increases Without Driving Customers Away

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StrategyDriven Managing Your Finances Article |Costs|How To Offset Cost Increases Without Driving Customers AwayThe cost of doing business is increasing. It’s mainly due to the pandemic, stretching supply chains and bringing manufacturing and sourcing closer to home. But, it’s also because governments are clamping down harder on cheap foreign labor and polluting but cheap materials. The green agenda that governments are touting is going to impact the cost of making products and that in turn will affect your price. Rather than driving customers away from your brand, you could do any of the following to offset the rise in the cost of doing business.

Work with local brands

One of the reasons why so many companies have chosen to take their manufacturing abroad is because in the West, it is seen as expensive to work with such brands. However, you may not have a choice anymore as customers are more aware of the business world. They do not want to buy products that have been made by sweatshops, made using techniques that harm the local environment etc. So, now is the time to begin sourcing your raw materials, manufacturing needs and storage demands at home. Work with local businesses and negotiate favorable terms that will benefit both parties. Long-term contracts will be more mutual and less in favor of one party or the other and thus lower costs for a more predictable length of time.

Productivity gains

Perhaps the biggest cost of doing business is your employees. Paying the salaries of employees is by far the largest expenditure any business faces. To offset some of your additional costs regarding increases in pay, promotions and bonuses, increasing productivity could make your employees more affordable. To improve long-term productivity, invest in the internet of things, so all platforms, products and services are connected to each other. Digital productivity is also improving, as just in the US alone productivity rose by 10.6%. All the while employees are working from home. Making your software remote-work-friendly is, therefore, a must.

Targeted increases

Rather than offset the price completely, you could choose to optimize your profit by targeted increases in products. For your most popular products, you should increase the price right now, before the additional increase in costs hits what you need to create that product. For example, if you have a popular dining table made out of glass and metal, increase the price and fix it in place for the foreseeable future. This gives your customers time to adjust to the price rather than suddenly piling it on as other brands inevitably increase their prices too. Supply chains are being stretched and changes to them are increasing costs across the board. A targeted increase of your products that are expensive and are popular, prevents it from looking as if you are taking advantage of the market squeeze.

The cost of doing business is increasing because of the pandemic’s impact on supply chains. The shift in a more ethically aware customer culture is also a powerful new force to be reckoned with. Do these things to offset your costs without driving customers away.