Financial Habits of the Most Successful Small Business Owners
1. Regularly review finances:
The External factors will always remain volatile,and your budget won’t change itself!! The Internet of things still needs enough automation to do that!! So buckle up, as it is very critical to review your financial goals weekly, it’s screaming for attention. Got promoted this year … CONGRATULATIONS!! AMP up your investments if you think you have invested less (Is your medical planning enough to cover contingencies). KIDS, Great, How are you planning to pay for their education. A lot more things to keep check for. Sit and Revise your finances often.
2. Use professionals to your advantage:
Deductions and write-offs can reduce your taxable income, but many people tend to ignore them and not take its advantages. Thus, Investing in a good tax consultant becomes necessary.3. Choose you debtors wisely:
With overdue invoices tying up your cash flow, one need to be proactive in mitigating the risk of late payments and bad debt. Writing off the bad debts can be devastating and with crashing revenues, what you need is a robust debtor management system. Deciding to provide credit, WAIT!! Not so soon. Scrutinize his past actions (any court actions or overdue debts). If you decide to go ahead, be regular with communicating and reminding due dates. Send regular balances and multiple easy payment options upfront. And when it involves large sum of money, try getting a credit insurance to reduce your risk of insolvency.4. Understand the dynamics of your Cashflow:
Predicting an accurate forecasting of working capital needed can be an arduous task but on the same hand Forecasting your cashflow can aide manage the perils and risks of growing a business.
A good forecast should address how much amount of money is needed to implement its business plan in the coming 12-16 months. An estimated lead-time between various capital levels, milestones where capital would be needed rather than giving all the money in lump sum amount. On the contrary, Cost projections in the personal expenses are often underestimated by small business owners, ignoring the implicit costs like paying yourself from the business earnings.
Therefore, understand your cashflow and try making one plan with three possible scenarios being the best,worst, and something in between.
Every business has its own key performance indicators. Organizations can use these KPIs to evaluate their success at reaching targets. A good KPI should act as a compass, helping the team understand whether you’re taking the right path towards your strategic goals.
A lot of KPI tracking software are available in the market like SimpleKPI.
Even tough these are very basic requirements, The biggest challenge is awareness and discipline that these financial habits need. Next time whenever you get stuck, seek professional help. It’s always worth the investment.