By | Craig Middleton
Running a business is all about money, and that should come as no surprise. After all, earning money is the end goal of all commerce. However, reaching that end goal requires additional money management in order to cover expenses. Only by walking the trapeze of balancing expenses and revenue can one make a profit. Here’s what you need to know about managing your business’s finances.
In order to start a business, you’ll need venture capital. While some wealthy business owners have funded their businesses out of pocket, this isn’t possible for most small business owners. Starting a business is prohibitively expensive for all but the wealthy, meaning that most potential business owners will need to seek financial assistance for the majority of their starting costs. Most commonly, this is accomplished in one of two ways, namely this is done by seeking a business loan from a bank or the contributions of an investor. Investors are typically more likely to invest in a new business, but this option will end up costing you in the end. This is because investors tend to demand some ownership of the company in exchange for their investments, and that can create conflicts down the road. Banks are harder to sway, but there are no additional conditions that will need to be met other than repaying the loan.
Financial Record Keeping
As stated above, a company’s profits are the result of an equation, and that equation is revenue minus expenses equals profit. Therefore, it stands to reason that you’ll need to know how much you’re spending and how much you’re earning in order to know how much of the money your business makes is actual profit. There are many methods of keeping track of this information, from revenue recognition to spreadsheets, and you’ll need to make use of these tools in order to accurately understand where money is going, both to and from your business’s account. In addition, hiring an account is an essential part of managing a business’s finances. An account is trained not only to assist with record keeping, but also to advise a business owner on how to save money and spend it more wisely in order to get ahead of the game.
In addition to hiring an account, outsourcing labor has a number of advantages. For one thing, outsourcing offers your business the chance to recruit experts and specialists, and that can enhance your business in order to simply increase revenue. There is a cost associated with this method, but it will pay for itself in short order. On the other hand, there is a growing trend of outsourcing the general workforce of a given company in order for the business to provide itself with a larger pool of candidates and to save money. By casting a wider net, you can potentially find more qualified candidates more easily than searching only within your physical area, and remote work saves businesses money, because it can reduce and/or eliminate certain costs associated with on site employees. A business with an outsourced labor force will spend less on real estate and electricity, and this logic can also be applied in cases in which a fully outsourced workforce isn’t viable, albeit to a lesser extent.
The supply chain is utterly foundational to any business. It stands to reason then that the details of a given business’s supply chain will have a profound effect on the viability of a business, and these details are subject to change. Arranging an effective and affordable supply chain is integral to keeping your business operating successfully and reducing overhead. You’ll want to shop around for the right distributors and wholesalers that can meet your needs and your budget. Likewise, you can negotiate for better prices when dealing with these vendors in order to further improve your foundation. In this regard, you can save a decent chunk of change by forgoing distributors and wholesalers in favor of buying goods directly from the manufacturer. While this means eschewing certain added value, saving money is potentially worth it. By the same token, it can be more valuable for a business owner to pay extra for those bells and whistles; it all depends on context.
While it can be taxing to optimize your business’s profits, it can be done. Using the right information and methodology, you can trim the fat in order to save money, and you can boost revenue, as well. These tips can help you get your footing, but there are even more proven methods of increasing your profits.