One of the most important aspects of any business is money management. In order to run a successful business, care must be taken to assure that both accounts payable and accounts receivable are being managed. You must get paid for products and services rendered to your clients and in turn, you must pay your vendors and other bills associated with operating your business. When proper money management is in place, it is easy to manage your Cash flow on a daily, weekly and monthly basis.
Know Your Expenses
All smart business owners know what their fixed expenses are. This typically includes expenses like rent or mortgages, utilities, expenses associated with employees, business insurance, inventory costs, advertising costs and equipment costs. While these costs might have a small degree of fluctuation from month to month, these types of expenses do not generally change much. Factors that might change these fixed costs might be having employees work overtime or hiring on to help with business growth. Inventory costs might vary as well if your supplier reduces or raises the cost of the units. When you have a good idea of what your expenses are, and you have a small buffer of extra money available, you can handle all of these things easily.
Know Your Revenues
It is also a good idea to know how much in revenue you can generally expect to receive. Like fixed costs, there could be some fluctuations based on factors such as seasonality. For instance, if your company is based in a cold weather place and you sell motorcycles or motorcycle parts and accessories, chances are the colder months and the winter season will be slower for you overall. Same can be said for seasonal resort destinations. If the majority of your business happens during the warmer months when kids are out of school for summer vacation, the colder off-season months will be leaner than the summer. However, if your business is a ski resort that thrives when there is plenty of snow on the ground, your best season will be during the winter. The key, no matter what your business model is, is to keep accurate records of your sales. When you have sales records, you can use forecasting to have a general idea of how much revenue your business produces all seasons of the year.
Keep All Accounts Current
One of the best ways to conduct business is by keeping every single account current at all times. If a client owes you money, you should be diligent about getting his prompt payment. Customers that pay on time keep your organisation running like a finely tuned machine. As a business owner, you will also want to be sure to pay all of your bills on time. When you pay all of your bills on time, you will not have to pay extra money for late fees and other associated penalties for paying your bills late. Being diligent about every aspect of your business operation is key to greater revenues and should be done religiously.