Monitoring the cash flow of your business is done by tracking income and expenses. An important financial term used when learning to understand money management is Cash Flow, which is the movement of cash in and out of a business through sales and expenses. As a small business owner, maintaining an accurate depiction of your company’s cash flow aides in financial stability from month to month. Let’s discuss three important money management tips to maintain and increase revenue.
- Monitor Spending– Business owners should be aware of all spending. It is your responsibility to keep a close eye on the spending trends of the business or delegate personnel to monitor bank accounts and monthly bills. One must keep in mind that auto debits, checks, debit card purchases and credit card bills generally debit from the same account. You should track your debits daily, remaining fully aware of cash flowing out of your business accounts.
- Build a Cash Reserve– Building a cash reserve can save your business from encountering negative cash flow when unexpected expenses arise. One of the best ways to begin building a cash reserve is to cut unnecessary costs and funnel those funds into a savings account that is to only be used in an emergency or an important business purchase. Another method is to allocate all increases in incoming funds, whether it is by increased sales or additional business, to an account specifically dedicated to cash reserves.
- Be Cost Conscious– As a small business owner you want to be as frugal as possible. You want to be conscious of the dollar value of items or services that could cost the business over time. Let’s make it clear that you do not want to take poor quality in the name of frugality, but you should always shop around for the best prices. Discounts, e-statements on accounts, coupons, rebates on equipment are all methods to practice frugality in business.
Money management is a vital aspect to a healthy business financial picture. It is important that you incorporate smart money practices into your daily business functions to avoid costly mistakes. Being strapped for cash puts a strain on business operations and will likely prohibit you from scaling your business to maintain and grow.
Source
Rohde, Jeff. 2022, Roofstock, https://learn.roofstock.com/blog/passive-income-vs-active-income#:~:text=Passive%20income%20includes%20money%20earned,wages%2C%20salaries%2C%20and%20commissions.
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