by Hayley Solich

Created on: January 02, 2008

Money Matters!

Anyone who thinks they can have a successful business without money has never tried to run a cash strapped business! Believe me, in business, money matters. So how do you effectively manage your money so that you can not only stay in business but make your business a growing, thriving business? Like running a household, there are some simple principles that make managing your finances wisely a possibility.

1. PLAN
Those who fail to plan, plan to fail. When setting up your business or even after it has been running for some time, cash projections are an effective way of looking into the future and trying to see where the money is coming from and when it will be going out. This allows you the opportunity to make major decisions like taking on a debt in order to expand etc.

2. LIMIT DEBTORS
If you can, run your business C.O.D. I am amazed at how many businesses give customers an account and then wonder why they are having trouble with cash flow. When your money is tied up by debtors it is not working for you. Unless you are charging them interest, it always pays to try and keep your accounts short term or C.O.D.

3. USE OTHER PEOPLE'S MONEY AS MUCH AS POSSIBLE
If you are taking on a job that requires the outlay of funds on materials, get a reasonable deposit from the person you are doing the job for. Equally, where others will allow you to have an account use one. Using other people's money will help you to have more cash to work with.

4. THINK FIRST BEFORE BORROWING TO EXPAND YOUR BUSINESS
If you need to borrow money to expand your operations then you need to have a very clear picture of how the expansion is going to increase your income. Many businesses make the mistake of trying to grow too big too fast. Take small financial steps wherever possible. There is no such thing as a fairy Godmother to rescue you if you get in over your head.

5. VIGILANTLY WATCH YOUR ACCOUNTS AND TRY TO STICK TO YOUR BUDGETS
Create a budget and try to stick to it as closely as possible. Like a jigsaw puzzle, a budget is a collection of the elements that make up your business. If one element is missing, the puzzle is not complete. If you over spend in one area, then you will be missing an element.

6. GUARD YOUR INVESTMENT
If you have other people involved in the finances of your business, make sure that you keep them accountable. Unfortunately, there are a lot of sharks out there. A friend of mine had trusted his partner and later found out he'd been robbing him blind into the value of millions of dollars. There are no such things as friends in business, so guard your investment.

7. GET PROFESSIONAL ADVICE
There are financial wizards out there that can help you capitalize on what you have. Seek professional advice, but make sure that you seek it from several sources to test the advice you have been given.

Cash flow is as important to a business as blood is to your body. Protect your cash flow by being wise about the timing and cost of all purchases. Also, make sure you are getting value for money from any employees or other businesses that you use. Keep them accountable as essentially every dollar wasted is a dollar out of your pocket!

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