How do you manage your business finances?


The success of every business relies on the use of financial tools such as loans and investments.

The financial management of your business is essential to its proper functioning and to the making of informed decisions. It refers to the funds accessible in a business and is at the heart of every business function, whether you are starting a new business, expanding an existing one, or producing new goods.

Your company's revenue is generated through the sales force of products or services. They are then used for production, to create new products to sell. The remaining funds are used to remunerate employees and cover administrative costs.

Controlling cash flow is a vital element for any business, and plays a key role in its proper functioning. Indeed, the success or failure of your business is determined by how these flows are managed. Even the day-to-day financial operations of your business require a constant flow of funds, from marketing expenses to employee salaries. Taking practical steps will help you control your expenses and grow your business without taking on excessive financial risk.

Here are some helpful tips for managing your business finances.

1. Manage cash flow

Ensuring the financial health of your business requires effective management of your cash flow.

Take a close look at all your business expenses (direct and indirect) and overhead costs (fixed, variable and semi-variable) to calculate your overhead rate and monitor it regularly. Review your business reports and assess your core business and financial operations against your sales and operating margins. Once you have costs and margins under control, you can take advantage of a variety of financial services and tools to manage your business funds and cash flow.

Evaluate your purchase, liability, credit and interest needs when considering a business debit or credit card. Obtaining financing is another tool to help your business grow. A business line of credit or business credit card can be a good option for short-term financing. To finance larger projects or commercial needs, such as a renovation, equipment or a new marketing campaign, a commercial loan can be the solution.

Effective management of trade receivables also improves the company's cash flow. A regular follow-up of customers in arrears must be put in place. Adopt good terms and conditions of payment. Systematically follow up with your late customers and forward recalcitrant cases to your debt collection partner.

2. Prioritize business financial planning

Budgeting, accounting, forecasting, tax planning, risk management are important aspects of managing your business finances as part of a comprehensive financial plan. Do not hesitate to analyze accounting reports and financial statements to better understand the performance of your business.

Planning ahead is also the best way to avoid the stress of tax time. Avoid common tax mistakes with organized books and accounting. For tax advice on the unique needs of your business, consult a tax accountant.

3. Improve inventory accuracy

Mastering inventory management is essential for your business. Poor management can lead to multiple problems: excess inventory causes unnecessary tie-up of funds and unnecessary risk of spoilage while too little inventory can cause problems when customer demand increases. Both situations can lead to lower sales, poor customer experience, and financial instability.

Effective stock management must make it possible to have the necessary quantity available at the right time. Many companies opt for an omnichannel sales strategy to reach more customers. This implies total efficiency in managing inventory simultaneously across all sales channels. For example, if a customer does not know that an item not available in store can be purchased online, a sale is lost.

Stay ahead of your inventory levels by using inventory management software that automatically connects your in-store and online catalogs.

4. Mitigate supply chain risks

Closely monitoring demand and working with vendors to ensure availability can help business owners mitigate product access risks and ensure your customer experience remains reliable and positive. Adjust supply chain strategies, track existing contracts and orders, and bring in backup vendors to prevent disruptions from eating away at your forecasted sales and revenue.

To plan for the future, review all of your business and supply chain plans and consider proactively tracking additional costs associated with business continuity.

5.Optimize your payroll process

The payroll process is a challenge for many businesses, even if they generate enough revenue. By optimizing this process, you can improve your cash flow, which makes it easier to compensate employees. Keep an eye on any salary indexations and take into account social charges, annual bonuses and other ancillary costs. The use of external annual funding allows the salary cost to be spread evenly throughout the year.

6. Regularly review your spending

It's important to keep a close eye on your business expenses. Good accounting software will allow you to quickly write useful reports, such as:

  • Profit and loss reports: these show your business's income, expenses and profits over time;
  • Balance sheet reports: these show net assets, liabilities and equity;
  • Cash Flow Statement Reports: These show the cash flow in and out of your business;
  • Accounts Payable and Accounts Receivable reports: they give a statement of the amounts due and receivable but also the payment period;
  • Amortization reports.

Also keep an eye on your payroll, even if you outsource part of it.

For a growing business, this is often more complex than expected. Review all of these items regularly, preferably with the help of your accountant or financial advisor. Remember to separate your personal and business finances: use a separate credit card and bank account for business expenses

In conclusion, good financial management is essential to increase profits and ensure the success of your business in the relevant field. Effective financial planning has the ability to increase the value of your business and improve its profitability. You can get help from highly experienced, knowledgeable and expert professionals by availing their services.

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