Hello and welcome to a Piece of Peace, your weekly dose of motivation and inspiration.
Today I would like to discuss an important principle for all the young entrepreneurs out there and that is “Financial Management”.
Each day millions of young minds all over the world wake up with a dream to be more. For those lucky few who have the entrepreneurial drive and ambition to embark on that long, hard and lonely road to success, one of the most important things to learn is good financial management.
Financial Management can be defined as the management of the finances of a business/organization in order to achieve financial objectives.
Sound financial management is one of the best ways for your business to remain profitable and solvent. Each year thousands of potentially successful businesses fail not because of lack of funds but because of poor financial management. As the business owner, you need to learn how to ensure that you will meet your financial obligations.
Taking a commercial business as the most common organizational structure, the key objectives of financial management would be to:
• Create wealth for the business;
• Generate cash; and
• Provide an adequate return on investment bearing in mind the risks that the business is taking and the resources invested.
Consider any business you start as a vehicle. Your finance is the fuel you need to move that vehicle forward. Without petrol your car cannot move and that is the same with your business. In order to learn about good financial management here are some practical tips that will help aspiring entrepreneurs to plan efficiently with their money and ensure your business always has the fuel it needs to succeed.
1. Separate your personal finances from your business finances
2. Open a Bank account in the name of your business.
3. Bank all (I mean 100%) your sales into your business bank account.
4. On the bank deposit slip specify the name of your client instead of your name or staff name.
5. Where your business (e.g. a supermarket) has numerous clients and numerous transactions, (4) above will not be possible.
6. Collect and review your bank statement monthly.
7. Keep a record of how your Petty cash is spent.
8. Open a second account (investment account) for the business
9. If it is an investment account, transfer a percent of your sales (daily or per project) into that account.
10. When the money in that account is substantial, invest it.
11. Make all your payments with cheques, except where not possible.
12. Collect receipts for all payments made.
13. Attach your receipt behind your payment voucher and file.
14. Open a personal current account in your name.
15. Pay yourself a salary.
16. In order to manage cash flow, you can pay yourself fortnightly.
17. Make personal expenses from your personal account not business account.
18. Keep all receipts, invoices and financial documents even before you start trading.
19. Where you don’t have enough cash you can pay yourself fortnightly.
20. Never use your ATM card on your Business account.
21. Issue an invoice for all sales made.
22. Issue a receipt for all monies (cash, cheque, and e-payment) received.
23. Have a planned financial outcome of what your business wants to achieve for the year.
24. The planned outcome must be represented by your sales, marketing, production and other expenses.
25. Break the planned outcome for the year into months.
26. At the end of every month, review your planned outcome with your actual performance and make necessary improvements.
27. Set up a basic record keeping system for your business.
Follow these financial steps and you will ensure you are planning efficiently to give your business a fighting chance in a very competitive market. Until next week, never give in or give up and remember always, be yourself because everyone else is taken.
2015 ©Peace Hyde