As companies continue to expand, their financial capabilities and responsibilities also grow. During this time, business owners may find monetary and cashflow activities tedious and challenging.
However, the side of the business should be understood and developed by contractors or trades. Understanding cashflow better and managing income helps deflect possible losses in revenue and investments.
Knowing how to correctly manage the financial aspect of your business is crucial to the overall growth of the company. Without the proper allocation procedures and percentage breakdowns, business owners will lose track of their finances, which in return, can be detrimental for the organization. With that, this resource will provide steps to help you manage your cashflow better. These are things you will learn at the end of this resource:
Understand the importance of financial management:
As always, knowledge is power. With the right information, you can make changes in your business and avoid setbacks. Through this resource, you will realise the significance of financial management on your business and life.
Difference between numbers and percentage
It may look similar at first, but digits and percentages have a distinction. In the resource, you will learn their differences, when to apply them, and how to effectively use them in business.
Determining the loose ends in your business.
Believe it or not, learning the financial aspect of your company helps tie loose ends in the business processes. By simply analysing the flow of money, you can establish the missing components. This resource will show how managing financial better will pinpoint problems, which later on, can be solved before becoming larger issues.
With the nature of their work, businesses in the trades industry have difficulty managing their finances. Contractors take out money to purchase materials and other necessary tools but they have to wait for the return in the investment. In Most cases, the payment for the deals is staggered-dependent on the project’s progress and other relevant factors. In other words, when delays occur in the workplace, the contractor has to fill in the void. When this happens, businesses have to make adjustments to avert financial woes and other issues.
Hence, contractors have to know how to manage their finances better in case of different emergencies and future needs. Hence, financial management plays an important role in organizing the allocation process of your money. Financial management is not only centred on the distribution of funds, but it looks at the spending methods of the business.
Financial Management includes the planning and controlling of the funds that come in and go out the organization. In this case, it also includes that budgeting plans of the company for the next months and investment strategies of the company. Financial management should be rooted in the internal and external improvement of the company in terms of planning, marketing, and managing the organization.
Numbers VS percentage
Business owners have to realise that when the expense are higher than their revenue something is wrong with their processes. In other words, the owners has to revaluate the business procedures to determine lapses within the company. Significantly, if one of the bank accounts has no balances in it, the business owner also has rethink his or her financial strategies.
With that, numbers and percentages come in the picture. But what really is the differences between numbers and percentages when it comes to the financial aspect of the business? While the two components are related, numbers and percentage can affect the flow of the company.
Numbers are specific, predefined, and constant. When you say $1000. It will always be the same, a thousand dollars. On the other hand, in this particular setting, the percentage is a dependent variable. When you say 10% of the income, the equivalent will vary according to the overall revenue in that certain timeframe. If the company earns $1,000 in one week, the 10% will be $100. But if the company earns $3000 in that one week, the 10% will become $300. The difference is staggering. Hence, business need to use percentage to ensure the feasibility of a plan.
Moreover, using percentage is safe wager for the company. If the business experiences less revenue, the allocation will be adjusted based on the percentage. Therefore, businesses should realise when utilise numbers and percentages in their business processes.
Tying loose ends
By evaluating the current financial state of the company, the owner can tie loose ends and make immediate change. For instance, if the budget for operational expenses exceeded the allotted fund, then the company has to make adjustments. Is it overspending or underpricing? How can we solve this problem? Am I really earning in this business?
It’s hard to see the financial distractions if you are not familiar with the inputs, invoices, and needs of the business. So, as the owner, you have to look into it more carefully. While learning these things cannot happen overnight, you have the power to take simple step by studying more.
Managing your money and growing your cashflow requires time and effort. Importantly, it needs discipline and determination. Later on, this process of putting money in designated bank accounts becomes a habit. And eventually, you will see results in the coming months. Have patience and learn to save your money. Even when you are earning more than you had before, it is always wise to mot spend beyond your means and save up. Through these easy tricks you will observe remarkable changes in the business and in your lives.