Effective financial management is one of the keys to helping your business succeed. Ironically, it’s also an area that many people neglect to concentrate on when they first go self-employed, especially if they run a business that’s got no connection to the white-collar world. That’s why we’ve put together these tips to help you ensure that your financial management works with your business, rather than against it.
Don’t scrimp on good admin
One of the keys to success in any area is effective administration. It’s important to ensure that your company is able to access data about itself immediately and easily, especially data that relates to its finances. Keeping a record of the firm’s money will enable you to complete a number of essential tasks, such as checking for unpaid invoices, deciding whether you can afford investments when they come along, and measuring whether or not you’re meeting your company’s targets. There is a range of financial software out there that can help you if you’re not certain about how to do this, and it’s never a bad idea to obtain an accurate audit report for your business.
One of the biggest errors that people make when starting up a company – especially if it’s the first time they’ve been self-employed – is to overspend. Some people will obtain their first couple of decent-sized contracts whilst still working from home, and then celebrate by investing in a huge new office by the river and a brand new iMac! Needless to say, this is a recipe for disaster. It’s important to avoid racking up overheads before you’re 100% sure that you can pay for them over at least next six months. A simple rule to follow is this: if you’re not sure about a new spend at any point, then don’t proceed. It’s just not worth the risk.
Just because you’re owed money, doesn’t mean you’ll get it on time.
This is one of the harshest lessons that anyone learns when working for themselves. In a way, that’s surprising: it’s hardly a state secret that people don’t like handing out cash! However, it’s an unfortunate fact that sometimes, those paydays won’t reach you when they’re supposed to. One of the keys to avoiding this where possible is to put payment periods on your invoices (ie, ‘this fee must be paid within 14 days…’), and to ensure that in the event of any lateness, you maintain a state of firm politeness. You should also draw up a contract for the work specifying exactly what the job entailed, so that there can be no dispute as to whether or not it has been done.
Don’t spend money before you’ve got it
One of the best ways to ensure that your business runs effectively is to avoid debt. Whilst in some cases the avoidance of capital in some form is virtually impossible, a great many modern office industries (including PR, marketing, administration, web design, graphic design and others) can be carried out with virtually no overheads in the early stages. All you really need is a computer, a phone and the internet! Try and ensure that you only rely on genuine, in-the-bank profit for the first few months, as this will avoid your growth being hindered by debt later on.
Do a great job
Is this a financial tip? Well, in a sense, no. However, ensuring that you do a bang-up job will affect finances in two ways: no-one’s going to try and dispute payment if they’re really happy with the service that’s been provided (well, almost no-one), and two, it will ensure you obtain plenty of referrals through word of mouth, and more referrals means more work, which in turn means greater profit!