A small business requires constant financial monitoring to ensure that revenues continue to stream in and expenses remain within reasonable bounds. One of the most difficult tasks of business owners is to take the time to review their financial statements on a regular basis to ensure that these two numbers are matching up appropriately. However, it is easy for expenses to overtake incoming revenues, whether because of uncontrolled spending or because of the need to spend on opportunities that have arisen unexpectedly. Here are a few areas that should be carefully monitored to ensure good financial management of your business:
Review Expenses Regularly
The workweek goes quickly for most small business owners. They are usually engaged in meeting with clients, finding solutions for problems, scouting out new markets and ensuring the efficient operation of daily tasks. Business owners often neglect going over financial data to ensure that they are making a profit. But weekly and monthly profit-and-loss reports can alert them to problems that are currently occurring that could have a large impact on the business’s success. Setting aside time each week to review this important data will help to avoid a variety of financial problems that can come up unexpectedly.
Monitor Expenses and Get New Quotes
Business owners should always be wary of “expense creep” that inevitably causes the upward movement of prices from vendors that can undermine the ability to show a profit for the month or the year. If the owner doesn’t have time, delegate the monitoring of the most common expenses to someone in your purchasing department. When prices get out of line, look for new vendors and get new quotes for these items. You should also get a new quote annually for business insurance and auto insurance to keep these regular expenses from inflating over time.
Control Credit Card Purchases
Credit cards make it easier to keep track of travel and entertainment expenses, but they can also make it too easy to go over-budget. Allow only your most trusted staff members to have a company credit, with strict instructions about acceptable expenses. Monitor credit card expenses regularly to ensure compliance with your restrictions.
Have Access To Financing When Needed
Small business owners should always be alert to the need for short or long-term loans that will help them through difficult times in the economy or that will allow them to take advantage of opportunities that come to their attention. It’s always a good idea to establish a working relationship with a company like Business Credit and Capital, so you can tap into the cash you need when you need it.
Pay Off Loans Quickly
When a small business owner does borrow money for business operations, he or she should make every effort to pay the balance off as quickly as possible, so you will be ready for the next opportunity. If possible, pay off loans before their term, so you establish a good credit record that you can tap into whenever the need arises.
An old adage says that if you take care of the pennies, the dollars will take care of themselves. If you maintain a daily effort to keep your expenses in line, you will be rewarded with financial gains at the end of every month and the end of every year.