Managing Your Business Money

Money is what keeps your business going, and for most, it is the main reason they are running a business in the first place Ė to make money. Thus, it makes sense to take care and pay close attention to this area.

Managing your business money is one of the most important tasks that you have to perform as a business manager. You need to keep a close track on what is coming in, what is going out and how well your business is performing financially. If you do not do this, you will most likely end up in financial trouble.

You need to ensure that you are aware of the details of what is going on with your business money. You need to do this not just whenever you can fit it in, but on a regular basis, perhaps weekly or monthly.

If you have individuals working for you that have access to money, they need to be accountable, and they need to follow the same rigid processes that you do with regard to the business money. They need to have the same attitude and approach. You need to take responsibility for this by instilling in them the behaviours that you want them to adopt regarding money.

There are times when having access to good accounting for your business is really important. Examples of this might include regulatory inspections, or when trying to get investment in. If in these situations you can show good monetary management skills and thorough, detailed accounts, you will have an easier time.

How to manage your business money effectively

Seven tips follow for how you can manage your business money effectively, or how you can perhaps improve on your current methods.  

1.    Regular Reviews

One very important tip that you should follow is to regularly review your financial situation with a good business accountant. This needs to happen on a monthly basis so that you ensure that your business is in good shape and that you are managing your business money in the most effective manner possible.

If you have a good accountant working with you and helping you to manage your business money, your business will have a higher chance of success. Your accountant is an expert in business money management after all. This is what they do day-in-day-out. They will think of areas that you have forgotten about. They will help you to ensure that you are paying all of your taxes in a correct and timely manner. Ask your accountant to meet with you as early as possible each month to review all appropriate financial reports. Schedule these meetings 12 months ahead. Do it now!

If you get into a regular pattern with this, things wonít go astray. When you are busy, it can be all too easy to let all of your business receipts pile up and not deal with them. This can lead to items not being accounted for as receipts get lost or forgotten about.

When you are reviewing your finances regularly with your good business accountant, you should be able to see patterns emerge. This can help you to either be able to find ways to generate new revenue, or additional revenue, or alternatively to cut your business costs. These are excellent reasons for following this tip, as the more money that you can make, the better for you and the greater the chances of your business surviving in the longer term.

A good accountant will help you to be able to do all of this and will also help you to reduce your chances of having any nasty surprises such as taxes that you were not aware that you had to pay.  

2.    Use software to help you

There are a number of different software packages available on the market that can help you to manage your money more effectively. They usually include all of the types of financial reports that you would ever want to be able to generate. Examples of some good ones are:

∑    Quicken
∑    QuickBooks
∑    MYOB
∑    Peachtree Complete Accounting

These types of software help you to organise the record keeping of your finances for your business. Look at what each has to offer, and select the one that you think will work the best for your business.

These types of packages include the ability to track cash flow, create a balance sheet, manage your accounts receivable and payable, and do extras such as create invoices that you can send to clients for billing purposes. If this is what you need, make sure that the package that you select does have this option. In many cases, these programmes also allow you to export reports into Microsoft Excel, so that you have the ability to provide a standard report in a format that others can open.

Trying to manage your company finances manually is time-consuming, challenging and completely unnecessary. Getting hold of a package will speed things up considerably and make your business money management much more streamlined and organised.

3.    Budget

One of the most important financial management tasks that you will need to do is to budget your money effectively and learn to stick to the budget that you create for your business. This allows you to be able to understand exactly what your outgoings are and to be able to pay for everything each week, month, quarter or year.

You can start by making a list of all of the payments that you have to make. List those items that you have to pay for frequently first. Brainstorm to make sure that you have everything on your list. Then work out from there, listing out all of your monthly, quarterly and yearly expenditures. You will have items on your list from bigger expenses such as salaries, rent, taxes, repayment of loans and travel right down to the smaller, but important expenses that add up, such as stationery. Donít forget to include one-off expenditures that come up from time to time, such as those for equipment, e.g. computers, printers, photocopiers.

Then think about the money that is coming in. You need to have a good estimate of sales / likely revenues so that you can ensure that you can cover all of your bills.  

You should at a minimum have a budget for the next month, quarter and full year ahead. If times are hard, you may even want to do this for the upcoming week, until you get through the hard times. Keep your budget up-to-date, so that unexpected receivables and payables get included. Not keeping the budget updated is almost as bad as not having a budget in the first place.

Make sure that you budget and plan carefully. You can use the information that you already have to do this, in order to estimate as effectively as possible. One example of this is in relation to receivables. You will be aware of when clients pay you in many cases. Some have a regular way of working that you will be able to track, so youíll know if you can expect your money 30, 60 or 90 days later than the date of invoice issue. This kind of information can be included.

Donít forget also to include variations that occur when youíre looking at your monthly budgeting. In the case of most businesses there is some seasonal variation. Some months you will have higher revenues and others will be lower. For example, in the travel industry, sales are usually pretty high in January and again in May, when people are thinking about their holidays, while other months can be much lower.

Budgeting your money effectively allows you to be able to manage risk more carefully. If you know where you are with your money at all times, you are better able to manage crises when they arise.

4.    Pay on time, but not earlier

One of the most important rules about managing your company finances is that you need to pay on time so that you donít incur interest rates, but you should not pay one day earlier than necessary. The longer the money sits in your bank account rather than that of your supplier or other business or person that you have to pay the better it is for you, as you will be accruing interest on that money.

You should always make the most of payment terms that you have open to you. If the bill is due in 30 days, always pay it in 30 days, not right away. You can leave it right until the last minute by using electronic funds transfer. This approach has the other advantage of keeping your money available to you for longer, in case of emergency too.

The only exception when you may want to pay earlier than the due date is if the terms of payment are more beneficial to you if you pay ahead of time. One example of this might be if the company that you owe the money to offers a discount for paying early. In this case, it may be worth your while to pay more quickly. There may also be more flexible payment terms if you pay earlier, and in this instance it may also be advantageous to pay early.

There are a few other tips that you can follow that help keep money in your account for longer. These include using credit cards for expenses such as travel and petrol. This way, you delay payment for a while, usually for around three weeks after you receive the statement.

As a general rule you should not give employees salary or expense advances. This is not good business practice.

5.    Be organized with your Accounts Receivable

In the same way that you have to try and keep the money in your account for as long as possible, you also need to try and get owed money into your bank account as quickly as you can.  You need to manage your accounts receivable very closely and carefully. There are a number of ways in which you can go about getting rapid payment. These include:

∑    Sending out invoices as soon as possible after the work is complete.
∑    Follow up on non-payment of invoices as soon as possible (the same day as the goods are sent or when the service is complete) after the payment date has gone by.
∑    Add interest to late payments.
∑    Get deposits from customers.
∑    Give discounts to customers who pay quickly.
∑    Look through the records for customers who pay slowly and avoid pushing those relationships.
∑    Deposit cheques on the same day that you get them. Find out about bank times for the money to appear in your account and the cut off time for when they need to be in your account each day in order to show up more quickly.
∑    Perform a credit check on a new customer before giving them credit. You might also consider getting references.

If you follow these suggestions you will find that you are generally getting money coming in more quickly and more reliably, which makes it much easier for you to plan cash flow on a monthly basis.

6.    Manage shortfalls

Even if you budget very carefully, there is still a risk that at some point you will end up in a situation where you cannot pay a bill or two. If you are planning and budgeting very carefully, this will most commonly be due to an unforeseen event or expense. If you have planned and budgeted carefully all along, your bank will be more likely to help you to get out of the situation than if you have run into difficulties through poor budgeting and carelessness. If you can show that you were being careful and that you have a plan for getting out of the situation that has arisen, your bank may be able to lend you money that you can pay back monthly. If you can show that you anticipated the problem ahead of time, even better. In this instance you will have more time to get the loan organised and youíll find the bank to be more open to the possibility of a loan.

During times of crisis, be careful about who you pay first. In most cases, it is best to keep on paying salaries in the first instance and look to other bills that can wait, rather than paying your employees late. Employees do not appreciate this.

Sometimes you may be able to ask your suppliers for a little bit of flexibility. This is more likely to be effective if you have always been reliable for payments in the past. This is another method by which you can manage a shortfall in your financial situation.

You can also turn to your customers. If you have regular, long-standing, good customers, they may be open to a deal where they pay a little less if they pay more quickly. Also, at these times of shortfall, you should chase slow or late payers even harder than usual.

Another option is to sell items that you donít need or to look to outsource some functions. Certain tasks can be performed more cheaply than by having employees in the office in some cases.

If it is possible, you should try and ensure that you have some money set aside for emergency situations so that you can avoid shortfalls altogether. Carefully cash flow planning and budgeting can help you to be able to do this.

7.    Introduce money management processes

You should introduce good money management processes in your company so that money is carefully managed and tracked on a continual basis.

One important thing to do is to make sure that you check your bank statements each month. This is good business practise and you will find that banks do make mistakes from time to time. You do not want to be a victim of these errors.

You should introduce clear billing procedures and processes, so that bills get sent in a timely fashion and so that there is a way for tracking when customers are paying late, and following it up very quickly. Many companies have 30, 60 and 90 days policies regarding payment. These payments should be carefully tracked.

Also you need to have a clear expenses policy that is written down, that all employees have access to and understand. They need to know what items they can put on business expenses and what they cannot. They also have to know when they will need to get authorisation for a particular expense, and what they have to do to get expenses signed off and paid to them. If everything is clear in this area you can avoid quite a few problems that can arise.  

The monthly accountant review of your finances is a critical process that you need to implement, so that you are keeping track of everything carefully at all times.


To summarise, keeping track of all incomings and outgoings of your company is critical to your business success. It is necessary to have some clear processes documented about the management of all financial aspects of your company. You need to have good practises related to money, including planning and budgeting very carefully. Managing your accounts receivable in a timely way is extremely important, so that the money is coming in as it should. Conversely, sending money out at the last possible moment for your bills is standard and is good business practise. You can use a software package to track your business finances, but you should always ensure that you are reviewing everything with a good accountant on a monthly basis, so that you donít overlook something important.

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