5 Quick Tips for Business Owners

1.Understand your sources and usage of funds

As a business owner, you have to know how and where to source your funds and what is the best use for them.  This is why creating a REALISTIC budget is highly recommended.  This will allow you to stick to your plan and allocate funds to activities that can best improve your business. Small expenses add up and by having a budget, you can review your expenses and readjust unproductive expenses.

2.Periodic review of all expenses

When was the last time you reviewed your expenses? You’ll be surprised at how much businesses can save by going through their expenses one line at a time. It is a best practice for every business to review what suppliers have been charging them regularly. What was good for you before might not be the best for you now. Could switching to a different provider save $100 a month? For example, when you first bought your phone plan, you chose a plan that was within your budget. Reviewing your current phone activity, is it still the best available plan?

3.Use the power of financial statements: Financial statements give you a snapshot of various facts about your company.  It is quite easy.

The Balance Sheet summarizes what the company owns (assets), what it owes (liabilities), and the amount you invested as the owner/s (equity). For small business owners, the balance sheet is especially helpful when you want to see in a nutshell your capital structure---meaning how much money you have put into the business and how much money you owe.

The Income Statement summarizes a company’s revenue and expenses. This statement shows you whether you made a profit from your business activities.

The Cash Flow Statement is important because it shows you your cash position at any point in time. It shows the amounts of cash that enter and leave the company during a period of time. Do you know that you can actually make a profit based on your income statement but actually be cash-strapped?

4.Minimize your fixed costs
Business risks always come from fixed expenses that do not change in proportion to a company's activities (that monthly rent for example). Businesses that have high fixed-costs face substantial risk due to the cash flow problems. Variable costs, on the other hand, are incurred only when a product is sold.  As a business owner, be aware of what expense is a fixed expense and what is variable.  Are there opportunities to transform a fixed expense into a variable expense?

5.Bill your customers on time
Oh yes!  It is quite surprising how many business owners don't have a billing process. Billing delays can delay your cash inflow and impact your ability to pay your suppliers. It can also cost you opportunity costs.  Chasing down your receivables will put you on a better financial standing. Have you ever considered incentivizing customers by giving discounts for early payments?

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