How to Safely Manage Your Money – 8 Things You Can Do Now

by Ed Martin

Money plays a huge role in the success or failure of your business. Making money is why you started a business to begin with, right? Not too surprising then that good money management skills are a must. Without them even profitable businesses can get into trouble.

Why money management matters

The truth is, no matter how much or how little you take in, the way you manage your money determines how successful you will be. You can be profitable, but not have cash on hand to pay your employees, suppliers or rent if it is all tied up in inventory and accounts receivables because your customers haven’t paid you yet.Mess this up and you don’t need to worry about anything else because you won’t have a business for long.

Take charge of your money

The good news is that you don’t need a degree in accounting to take control of your money. Here are some things you can do right now.

  1. Make sure you have a separate business account. Don’t mix up your personal account with your business. It makes record keeping way too hard.
  2. Keep track of where your money is and how much you are actually spending each month compared to how much you should be spending. If this sounds like setting up a budget, that’s because it is. When you do this you will know when you are running over on spending or not pulling in enough money in revenues. Now you can make some smart adjustments to cover gaps. If you’ve got extra money in a month you can keep it for those bad months.
  3. If people owe you money, collect your receivables as soon as you can. Better yet, try to get paid in cash without credit.
  4. Try to pay your bills as late as you can. You want to get your money in as soon as you can and hold on to it as long as you can.
  5. Watch your expenses like a hawk. Little things add up. This is where having a budget for your business helps. You worked hard to earn the money, so don’t be too free to spend it. You might be able to work with a lower sales price than your competition if you can manage your expenses well.
  6. If you have to buy supplies or inventory get only as much as you need and only when you need it. That requires careful and accurate planning, but can give big rewards in your cash position.
  7. If you aren’t sure what you need to do for taxes, find someone who can help. Hire an accountant. Call in a bookkeeper to help you get your records in order.
  8. Keep organized records. This doesn’t have to be hard, even for people who can’t organize a two cat parade. For you people, and you know who you are, I have a simple method for you to follow. If you already have a good record keeping system, move along please to the Resources section. Nothing to see here.

OK, for the rest of us, you’ll need a couple of file folders and some envelopes.

Label one folder Expenses.
Think about the different kinds of expenses you have. Label envelope for each group. You might have one envelope labeled supplies, one labeled postage, one labeled rent and so on.
Put these envelopes inside the Expenses folder. When you spend some money, put the receipt for your bill into the right Expense envelope. Make new ones if you need.
Make another folder called Income. This time we need some envelopes to keep track of orders received, sales made, and money you’ve received. You can have one envelope for completed orders/sales and one for pending. Whatever works best for you.

Now you have a record keeping system. You can keep track of the incomes and expenses so you know where your money comes from and goes to. Easy peasy.

The same system works if you put things into a spreadsheet or an accounting program. It’s all still folders and envelopes.  If nothing else, use a couple of shoe boxes, anything as long as you’re saving the stuff.

Resources

Bean Counter has a nice online bookkeeping tutorial if you really want to get into it.

Quicken is, well, famous for its finance software.

Microsoft has quit selling Money for now, but says it will be back some time.
About.com has a couple of places with small and home business accounting software reviews on the Small Business Canada and Financial Software sites.

Not handling your money well is one of the common reasons businesses fail. Sign up for my MicroBiz Made Simple newsletter and receive a free copy of my report Succeed By Not Failing: The 50 most common reasons businesses fail and how to avoid them.

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