How to Better Manage Your Business’s Budget

Businesses need to manage their money well to stay in business; this is a fact. Each year, out of all small businesses that fail, 82% of them do so because of cash flow problems. These problems can be avoided by eliminating unnecessary expenses, keeping accurate books, and sticking to a well-planned budget. Even if your business isn’t classed as a small business, more than one in two of all companies will fail because of cash flow related issues.

Collect On-Time Payments

There are three great options when it comes to collecting payments.

• Traditional Invoices – Invoices are typically documents generated to collect payment for services rendered or goods delivered within a particular time frame. That can be before delivery, directly after, or following a delay of so many days. These are reasonably inefficient and require extra steps to integrate with your bank records and bookkeeping systems.

• Payment at Time of Service – Traditional payment processing that isn’t invoiced typically falls under this category. It’s most efficient as a one-time method, but as most businesses are built on repeat customers, it’s not ideal in the long run unless you’re selling products that are not a regular, repeat buy.

• Payment Services and Apps – You want repeat customers if you’re going to succeed and this the method to help you get there. There are a variety of services and applications that can be signed up for online that let you process payments through them. This might be a payment for a one-time event, a recurring service, or an upfront fee and a recurring maintenance payment. Whatever your industry, chances are you are covered. There are apps for musicians as well as freelance web developers.

Utilize Tracking Software

Tracking software is available for just about anything- phone time and usage. Email stats. Employee performance. You can even budget energy online with specific software and tools.

Tracking these metrics will help you understand what your baseline is, if there are any times when a number isn’t what it should be, and help cut costs or encourage better future behavior with data to back up any changes that should happen after you implement a solution.

Keep Solid Records (and Double Check Them)

A business needs accurate records to thrive. Files should be updated at the end of each working day. This way all changes are recorded as accurately as possible.

Accountants and bookkeepers are typically reliable people. If you’ve worked with them for some time, you know you can trust their advice on certain things. However, you still know your business best. Looking over your books is a great way to clarify things that may not be apparent to your accountant, especially if they are responsible for the accountants of many businesses or you primarily only come to them at tax time.

Have a Plan for the Worst-Case-Scenario (and the Best-Case)

Sometimes a disaster will mandate a new budget plan. The best way to be able to handle such a disaster is to create a basic emergency plan. If you are not paid for a certain amount of time, you have no cash flow. How will your business survive? Answer questions like these within your overall budget strategy to stay prepared.

Budgets are all about good information and follow through. Once you establish what your budget should be to maintain day-to-day operations, you have a starting place. Then you must track and keep to that budget. If you can do that, a quarterly revision should allow you to plot out an actual growth strategy over time.