As an entrepreneur, financial management is one of the key factors to business success, apart from attaining high number of customers and having a solid team behind you to manage the business. Often, financial management is also one of the toughest tasks faced by an entrepreneur.
There are many financial management tips available – either in printed version or electronically. These tips are intended to provide you with some ideas on how to manage your finances, especially for small businesses and those who are keen to venture into entrepreneurship.
For a new entrepreneur, it is good to invest your time and money by learning basic accounting and financial management. Even if you hire an accountant or a finance executive to manage the company finances, it is imperative that you as a business owner be able to read profit and loss statement and balance sheet, among others. A business owner must also be able to make tough financial decisions on his or her own without having to wait for the accountant to dictate financial matters that may not benefit the business as a whole.
There are courses widely available online and on-site organised by Government agencies, institutions of higher learnings and private training operators that could cost from next to nothing to thousands of Ringgit. Get one that is suitable to your needs.
Get a budget, and stick to it
A good business plan should include a budget that allows you to track the expenses and the money coming into the company account. Having a well-thought budget can keep you from spending unnecessarily on things that may not benefit your business. For a start, rather than renting a business premise in a prime location within Kuala Lumpur, you may be better off operating from a shared office space / co-working space. You will even get instantly connected too with your fellow co-workers. Imagine not having to spend so much on utilities and making new business connections.
Nevertheless, having a budget and being able to stick to the budget would not mean a thing if you do not know how to spend the money that you have saved up wisely. Shop around for the best insurance coverage, bank interest and legal fees, just to name a few.
Pay your bills and debts on time
Delays in paying bills and other debts will likely increase taking consideration the interest and penalties involved. Failure to do so may put a dent on your company cash flow in the long run. So, pay them on time. Who knows you may be rewarded for paying early?
Create cash flow
Especially for a new entrepreneur, getting ready cash or initial capital can be a challenge. Create a strategy to overcome the issue. You may wish to negotiate with your supplier(s) over getting favourable credit terms. You can also create special discounts or reward programmes to attract potential members to sign up and pay early. An effective pricing strategy can also determine the amount of cash coming into your account.
Alternatively, you may consider venturing into other forms of business to help raise capital, such as:
a. Become an insurance or real estate agents;
b. Register as an e-hailing driver;
c. Teach a skill; or
d. Operate a cash business such as food kiosk.
Depending on your preference, this could be a short-term gig until you are financially ready.
Never mix business and personal account
Set a personal budget and a business budget and stick to them. Using company funds or corporate credit card for personal use or vice versa indiscriminately may lead to confusion. This is especially when you are not well-versed in accounting as there a number of issues to be taken into consideration including tax concerns, assets and liabilities.
Hire an in-house accountant or outsource to an accounting firm?
While you may be able to manage your finances yourself, it can be taxing at times and the last thing you need is a bookkeeping error which could be costly to the business. If you have the budget, you may wish to consider hiring a staff to work for you, or outsource it to a registered accounting firm. However, there are several considerations to be looked into, especially where the cost and time management are concerned. Take also into consideration the professional advice on tax filing, profit maximisation and business growth that you may get from both sources.
So there you go. Some of these tips may or may not work best for you. Do check out what is best.
· Ramdev, V. (2016, June 20). Enterpreneur India. 4 Money Management Tips for Smalls Business (https://www.entrepreneur.com/article/277767).
· Gregory, A. (2018, December 22, updated). The Balance Small Business. 5 Everyday Money Management Tips for Small Business Owners, (https://www.thebalancesmb.com/money-management-small-business-owners-2951600).
· Phillips, B. (2017, August 2). Adzuna Blog. Money Management Tips for SMEs (https://www.adzuna.com.au/blog/2017/08/02/money-management-tips-smes/).
· Grimm. J. (2017, Aug 7). Summit CPA Group. Does Your Business Need an In-House Accountant or a CPA Firm? (https://www.summitcpa.net/blog/cpa-firm-vs-in-house-accountant).