Saturday, December 2, 2017

5 Essential Finance Tips Every Small Business Should Follow

Most startups and small businesses are looking for ways to manage their finances more effectively. Success in the early stages takes both operating capital and controlling costs to allow profitability. 

This can seem like a delicate juggling act, but there are some financial strategies that small business owners can use to support growth.

Think Lean

Lean practices consist of limiting your spending and reducing waste of all kinds. Don’t indulge yourself with a big, fancy office if the money is better spent elsewhere. Look for lower-cost alternatives in everything, such as office furniture, electronics, equipment, supply chains, and so on. 

Don’t spend based on anticipated growth that isn’t guaranteed. And always, in every aspect of your business, look for ways to eliminate wasted time, effort, and materials.

Use Capital

While it’s a good idea to save up as much operating capital as possible, don’t be afraid to spend it on good opportunities, including building your credit. Work on building it by borrowing and using some capital to cover interest payments. 

If you have enough credit, acquisition of other startups can be a fast path to growth. Outside investments, such as real estate or bonds, may support positive cash flow over time.

Realistic Budgets

You have to balance your budget so that you’re left with useable net income every month, not just covering the bills. Identify a suitable gross profit margin for your industry and try to stick to it. 

Your budget should include normal business expenses, current payroll, utilities, and certain amounts to be set aside for marketing, emergency funds, and business investment. The budget has to be adjusted constantly to allow for a changing business environment.

Delay Hiring Help

Payroll is often one of the highest expenses for any company. For every new employee, you have to think about things like raises, benefits, workman’s comp insurance, and other issues. Hiring additional help should be the last resort. 

Instead, it might be cheaper over the long run to look at alternatives such as additional training, reorganization, better tools and technologies, or establishing a company culture of collaboration and mutual support.

Aggregate Spend

This is a process for the healthcare industry used to aggregate and monitor spending by manufacturers on individual doctors or caregiver associations to avoid inappropriate influencing. 

This includes products from related industries like pharmaceutical and biotech companies. You might face a penalty of $10,000 per violation. Providing gifts, bonuses, and other benefits must be transparent through mandatory documentation and reporting. 

This can be streamlined with tools designed to simplify aggregate spend compliance, such as those like Porzio AggregateSpendID®.

Managing finances takes a system of tracking and controls, as well as discipline. You should develop a smart financial plan and stick to it, while making adjustments as needed.

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