Knowing how to handle company finances is vital to a business venture’s success. But how do businesses manage finances properly?
Hiring a bookkeeping assistant can take the difficulty out of managing small business financials — especially the painstaking day-to-day tasks. Get your bookkeeping assistant to deal with your data entry and updating of account payables and receivables. This way, you can have updated books whenever you need them.
What Is Basic Financial Management?
Financial management refers to the planning, organizing, and allocating of the finances for a small business. Basic financial management for a small business involves proper control of the daily operations of a business. It requires staying within the allocated budget as well.
A financially sound small business involves having enough funds to support business operations. It also helps to be able to make good financial decisions. Business owners can get finances from various sources such as partner financing, financial institutions, bank loans, grants, crowdfunding, and venture capitalists. Whatever source you choose to get funds from, it should be acquired at minimum cost, within control factors, and at a balanced level.
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Thanks to great innovation and a credible financial strategy, Samsung, an electronics company, successfully ventured into hardware and telecommunications. Here’s how it maintains its financially sound business:
- Sets financial objectives and goals
- Identifies resources to be used
- Engages in financial decisions
- Analyzes data
- Tracks differences in budgeted versus actual results
- Evaluates the reasons for the differences
7 Tips For The Financial Management Of Small And Medium Enterprises
You need enough working capital to cover the necessary expenses when running an SME. To optimize your funds, it’s useful to look into how you can take advantage of good purchase times. Plus, being conscious of how even small expenses can add up to become a debt that should be minimized. Here are seven tips on finance for SMEs:
Allocate Budgets
Your bookkeeping assistant can help you record your available capital, estimated spending, and income projections. You can plan your business activities better by knowing exactly how much of your funds you can allocate to each project or product.
Budgets can serve as your guide to your financial goals. By anticipating how much you’ll have to pay in bills each month, you can also determine how much cash is available for other purchases or projects.
Also, make sure that all bills are paid promptly to avoid surcharges and other fees. Your VA can help create separate lists for recurring expenses and one-time payment purchases. Here are some costs that they’ll need to keep track of:
- Payroll
- Inventory purchases
- Utilities
- Payments on debts
- Insurance premiums
Monitor Expenses
Track your expenses to avoid overspending or misuse of business funds. Your VA can record all your expenses in your books so you can immediately see the summaries of your expenses and gauge if you’re using more than the allocated budget for a certain period or project.
Plus, ask your bookkeeping assistant to warn you of any irregular expenses before they are placed on your business debit or credit cards. This way, you can confirm if these expenses are necessary or should be canceled instead. They should also keep an eye out for uncashed checks. This way, you can avoid overdraft fees and overdrawn accounts.
Having someone keep your books up-to-date makes it easier to check on them. Accounting software can streamline the process, while making the data available on the go, too. It makes it convenient, especially if you’re always traveling or if your business has a remote working setup. Since you’re monitoring your expenses, you can also check on spending to ensure that you’re not overspending.
Remember Your Accounts Receivable
Small business operations may approve credit to customers, especially if for regular or large purchases of customers with good standing with your company. Have your bookkeeping assistant record them in your books and set reminders of their due dates and do payment reminders or follow-ups. This way, you collect accounts receivables promptly.
Also, have your VA make an accounts receivable summary for quick and easy tracking of the totals. This summary gives you a list of the names of customers who owe money to your company, the amount due, the due dates of collectibles, and the total of all receivables. Make sure to collect payments by letting your assistant send late notices and invoices to your customers. To motivate early payments also when you offer a discount for early settlements.
Time Your Purchases
Set a good billing plan by automating recurring payments. Also, ask your bookkeeping assistant to check for ideal times to purchase. Limit low cash flows by ensuring that your VA pays your bills first. They can give you a signal when there are enough funds to cover new purchases.
A good bookkeeping assistant can also give you a heads-up if there are ways to lessen your tax liability. For example, they can tell you that it’s a good time to buy office supplies and home office expenses at the end of the year. This way, you can claim them as deductibles on your tax return. Knowing the optimum time to make purchases can significantly reduce costs.
Manage Inventory
Managing small businesses involves monitoring your inventory regularly. Ask your bookkeeping assistant to list your inventory supplies. They can also classify which supplies to buy more of, and which to buy fewer of. This way, you don’t run out of inventory, especially if a shortage means turning away customers. Plus, you avoid purchasing unnecessary stuff that collects dust in your storage.
Your bookkeeping assistant can help you manage your inventory by tracking on-hand inventory. They can record purchases and sales in your accounting system so it’s easier to check it before buying more.
The online enterprise Amazon provides its machine learning inventory management system to its FBA-user sellers. Its management system inputs include the shipment time, the cost of goods sold, and Amazon data to predict customer demands and establish the best inventory level. This helps their sellers know how much inventory was sold and how many stocks are available to be sold. Even better, it lets them know the nearest storage location of each product, resulting in quicker deliveries to their customers.
Reduce Costs While Increasing Your Revenue
In business finance, minimizing costs – whenever you can – is always an excellent way to manage business funds. Combining this with active revenue growth allows you to have more profit or more funds for other projects. To see how you can reduce costs and increase income, ask your bookkeeping assistant to update your income and expense summaries. These summaries can show you what expenses you can scale down or remove altogether.
You can also ask your virtual bookkeeper to find other cheaper or better offers for high-cost services that you think can be replaced. To increase income, your virtual assistant can offer promotions and discounts through advertisements or email.
Treat Tax Payments Like Operating Expenses
A financially sound small business should pay tax payments as you do your operating expenses. It can be challenging to save for quarterly or annual tax payments. If this is the case for your business, spread your taxes every month. Ask your bookkeeping assistant to include it in the monthly payments so it will be lighter for your business. In the end, you’ve settled all tax payments without having to worry about saving up enough funds for them.
How A Magic Bookkeeping Assistant Helps Manage Business Finances
Magic assistants are reliable and proactive enough to get assigned tasks done efficiently. Here are bookkeeping tasks that a Magic bookkeeping assistant can do for you:
- Data entry
- Filing of tax returns
- Making accounts receivables and payables
- Report creations – monthly, quarterly, and end of the financial year
- Payroll
- Credit control
- Bank reconciliations
How do businesses manage finances? By hiring a Magic bookkeeping assistant who can take care of routine tasks that arise from bookkeeping. Also, they can help you be more organized in your digital files. Have updated and accurate bookkeeping books when you get a bookkeeping assistant at Magic. Call us today to get started.
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