For a business owner, it could be a point of pride to watch their dreams translate into profits. But, the road to success still comes with a number of potholes that you must avoid on your way. Money is one of them. It can be tricky to figure out which financial advice to pick and which not. Newbies have so much to learn. You have to search for a financial plan that fits your small business’s needs just like choosing an Optimum Internet plan. Maybe you could start with wealth management.
Financial managers have shared some wealth management strategies that can help you keep your finances in good shape and watch your business grow at the same time. Let’s have a look at them:
#1: Start an Opportunity Fund
Whenever the next big idea pops up, your business must be financially prepared to hop along. But how do you make sure you have sufficient funds ready and available?
Financial advisors recommend investing money in mutual funds or money market accounts. By the time the opportunity comes to knock at your door, the investment would have grown. You can then seize the opportunity.
The vision of an entrepreneur tends to change over time. In other words, it can evolve and it will continue to evolve. Even if you are not ready to invest yet, setting aside money each month will give you the confidence to quickly grab an opportunity as and when it arrives.
#2: Separate Business and Personal Finances Permanently
When you are initially starting, the temptation to mix your business and personal accounts is always strong. Financial experts say it is natural. But what happens is when you pour all your resources to see your dream business succeed, the lines between personal and business finances are blurred. It is not healthy for the viability of your business or personal needs. This has destroyed the financial lives of a number of people.
It is not fair to invest your personal resources in the business especially if you are financially supporting a family. You might be expecting good returns but a business can go down without prior notice. You wouldn’t want to have an empty personal account during times of financial crisis. Therefore, keep your business and permanent accounts separate. Maintain savings just like you used to when you were employed.
#3: Have a Good Billing Strategy
Each business owner has a client that is late when it comes to sending invoices and making payments. You might have a couple of such clients too. Wealth management also includes managing the cash flows to make sure your business is up and running on a daily basis. If your clients or customers are giving you a hard time when it comes to collecting payment, come up with a creative way to bill them.
Your business cash flow gets disturbed when too much of your cash is tied up in unpaid invoices. If this continues to happen, it can even take your business down to the road of failure. Instead of sending invoicing reminders or constantly calling customers to make the payment, come up with a different strategy. Offer an incentive. For instance, if the customer pays the invoice within the next 10 days, they will get a 3% discount on the entire bill. If not, they will have to make full payment.
#4: Keep Your Business Finances in Check
When the profits are rising, it’s easy to get complacent. Stop! You need to come up with a new budget plan and reallocate your finances in the right direction. Otherwise, you will just be putting yourself in financial distress. You may not see the effects right now, but later on, it could turn into huge chaos. If your business is growing, you need to take a moment and set plans for your future financial decisions.
Set some benchmarks and forecast the upcoming sales, profits, and other finances. This will help you stay organized. As you develop good habits when things are good, you won’t have to face much trouble when things are not in your favor. Stay as consistent as you can be as your business continues to grow. With proper planning, you can avoid business costs in the name of broken equipment or hiring a new employee.
#5: Manage the Inventory
Ask yourself, do you have too much inventory in the storage room? Or it’s the other way around i.e. you are constantly running out of products that are in demand. Either way, you are losing business. Part of wealth management is to improve the way you manage your inventory.
Track how much inventory you must maintain to avoid crossing the line between having too much and not having enough items. Keep a record of the inventory purchases as well as sales in your book. Once you are on the top of everything, you will know how much to order and when to order.
#6: Prepare For the Year-End
Nobody wants to miss out on the allowances and exemptions. If you are entitled to them, plan everything during the year rather than leaving it for the end of the tax year. History says it – when you leave such things at the end of the year, you miss out on what you are entitled to. Plus, you might end up paying huge taxes.
Bringing expenditures into the financial year or deferring them to the next can have a significant impact on your taxes. Part of wealth management is to take profits from your business in the most tax efficient way. The key is to minimize your tax bill. Apart from this, the time when you pay dividends and bonuses can also reduce your taxes. As you make improvements in the way you manage your business finances and keep a record of everything, you can improve your cash flow. Your profitability might improve as well.
#7: Know Your Clients
Financial advisors say that in niche markets, a new niche could be a source of new business. When you focus on your niche, you leverage. Financial advisors also suggest thinking of your ideal clients in term of personality and investment philosophy.
Startup businesses mostly turn away from less-than-ideal clients. If you are disciplined about the type of clients you take, it will pay you off big time in the future. You can’t take up every client. Your focus must be on the clients who are more profitable.
#8: Hire a CPA
Just because you are a business owner doesn’t mean you have to be an expert in everything. If can’t get the nitty-gritty financial details right, that’s ok. Your focus should be on the bigger picture i.e. the management instead of small details.
So don’t hesitate in hiring a CPA. That’s the best way of getting ahead of your accounting and finances. A CPA will help you fill the financial gaps and address your financial issues. When you start relying on the expertise of professionals, you will have more time on your hands to work on other aspects of your business.
The CPA will help you in crafting a financial strategy that addresses the short-term as well as long-term business needs. They might even help you in picking strong financial strategies that drive success. Hiring a CPA is an additional expense no doubt but it is worth it.
#9: Manage Your Customer Acquisition Cost
A business often has to deal with opportunity costs. It is the value of forgoing an activity as you choose its alternative. Whenever you have to make a tradeoff between two options, opportunity cost comes into play. It is important for a business to measure the cost associated with customer acquisition. It helps evaluate how much value each customer is bringing to your business. This evaluation will assist you in setting the right prices for your product or service.
#10: Learn to Say No
This is a big challenge for small business owners. It could be a difficult customer or an ill-fitting business opportunity – whatever the case, learn to say no to anything that doesn’t add value or bring long term success. Startups find this especially challenging because they are willing to take anything that comes their way. A successful business entrepreneur is the one who is able to differentiate between an opportunity and a headache. It may come with trial and error but once you learn this, it will make for a significant growth strategy.
Being a business owner doesn’t automatically make you a whiz when it comes to wealth management. You will be responsible for making big financial decisions for your business. At times, if you feel like you could use a bookkeeper or financial advisor, don’t hesitate in hiring one.
They can help you with making smart money management decisions. They are more experienced in their field and you shouldn’t hesitate in taking expert opinion. It’s just like you are reaching out to Optimum Service when you are experiencing trouble with your Internet connection. Expert help can come a long way.