As enjoyable and exciting it feels to run a company, accounting and financial management seem equally dreadful. Some entrepreneurs can’t get around numbers and stats, whereas others face trouble maintaining records. Even though accounting is a tedious job, you have to stay on top of all money-related matters to keep the business afloat. So, what can you do to update your company’s financial management?
For starters, accustom yourself to basic accounting principles and standards. It will set the foundation for preparing financials, ensuring robust recordkeeping. Likewise, determine if your customers are price sensitive and devise the pricing strategy accordingly. It will allow you to captivate audiences while giving substantial returns. However, that’s not all.
A lot more goes into handling a company’s financial operations. From cost management to tax filing – business owners have to look after everything. If you’re facing any trouble with this, have a look below. Here are five tips for businesses to streamline financial operations.
1. Learn the Ropes
Truthfully, managing finance-related tasks is no cakewalk. You must navigate International Financial Reporting Standards (IFRS) and ensure utmost compliance. And for that, you have to brush up on your financial skills. Most entrepreneurs enroll themselves in short courses, but that’s not effective. Instead, you can explore higher degree programs, especially the eLearning programs. After all, digitization has made education easier.
Therefore, look for an Online Master of Business Administration in Finance Program to learn the ins and outs of the financial world. In addition to developing financial know-how, it will help streamline operations. You would know when to file taxes, how to calculate deductibles, and manage invoices. Also, you will understand the importance of preparing balance sheets, income statements, and cash flows.
2. Manage Inventory Smartly
The items stored in the warehouse are a substantial business cost; hence, affecting profitability. After all, the more space your stock consumes, the more area you have to rent out. The only way to decrease this expense is by keeping inventory levels an absolute must for the business. So, why not install an inventory management system to keep a close eye on stock levels?
The use of an automated system will allow you to see how much of each item you have in stock. In addition, it will provide updated data on the sales trend. In turn, you can predict when the demand will be high and low, allowing you to adjust inventory levels accordingly. Besides this, effective inventory management will also impact the company’s liquidity. The less money you have stuck in inventories, the more cash will be available to the business to cover recurring costs.
3. Devise a Flexible Pricing Strategy
In most instances, lowering the overall price levels is a good way to drum up business and improve sales. But sometimes, even a slight markdown helps make your products or services appealing to customers. Now, the question is, what pricing strategy will work? It all depends on what sort of customers you have. If the clients are price sensitive, you must adopt a cost leadership strategy. It means you will sell at the lowest possible prices to attract the maximum number of people.
Remember, quality comes second in this type of pricing. Hence, if you offer a unique and high-quality product, opt for a differentiation strategy. It will attract customers who are quality conscious. In short, the people who don’t mind paying a few extra dollars for better quality products. Setting the right pricing strategy will improve financial operations and business profitability.
4. Recover Outstanding Payments
At times, customers take forever to repay, and for the sake of maintaining relationships, entrepreneurs don’t bug them every hour. In reality, unpaid invoices can harm your cash flow and business operations. Despite earning substantial profits, there isn’t enough cash available to incur routine expenses. Consequently, you might end up with working capital financing and bear additional interest expenses.
Therefore, ensure to recover all outstanding payments. You have to remind the debtors of their obligations regularly without any hesitation. In addition, state payment terms and conditions clearly when making the sales agreement. You can also list the penalties and charges for late payments to ensure clients pay timely.
5. Apply for Business Financing
Most businesses aren’t comfortable opting for financing. There’s a general perception that loans lay a debt trap for companies, which is nothing but a myth. At one point in time, every business needs funds to keep the operations running, and here, lending is the best possible choice. It will help you acquire some needed capital and improve your financial position.
However, if your business credit isn’t established yet or your credit score lags, you can opt for invoice factoring. It will enable bill discounting, letting you receive payments on time. In turn, you can utilize that money to fulfill working capital needs and run operations smoothly.
Effective financial management is crucial to running a business, but that’s not as simple as it may sound. You have to learn the accounting basics, cut back on costs, and redefine payment terms with the clients. All in all, you have to ensure there is sufficient cash coming into the business to avoid a liquidity crisis. Likewise, explore financing options to fund working capital needs and avail expansion opportunities to increase business profitability.