How can you manage the financial circle of your business?

Every other business is aimed at profit making except for those run for public welfare e.g. non-governmental organizations. Nevertheless, financial management is an imperative aspect of every business, if it aims to survive.

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Financial Management is a business function, which you, as a businessperson, cannot afford to handle with lenience. Even if a simple wholesale website like Wholesale Pages would ignore financial management, it cannot keep up with its competitors. Considering its importance, mentioned below are some of the important tips that would help you manage the financial matters of your business.

Manage your Investment

Funnelling investment into the business can be regarded as the first step in financial cycle. This is a point where you need to decide the source of investment. Small businesses which are not listed on stock-exchange are unable to sell their shares for arranging finance. However, small businesses can avail loans. Here my suggestion would be to avoid interest-based loans, as it gets difficult to pay-back loans which have interest factors attached. However, large businesses listed on the stock exchange can easily arrange finance through share issuance. An appraisal report must be developed to figure out how much finance is needed to give a kick start to your business.

Perform Aged Debtor Analysis

Debtors are booked as assets in the financial statement. You should perform ‘Aged Debtor Analysis’ to see what the respective ages of your debtors are. With this analysis, you will come to know which of your debtors are taking how much time to pay you off. In this way you can pursue aged debtors and force them to pay you at the earliest. Failure to perform the aged debtor analysis is likely to lead your business to book debtors as bad debts, which directly affect the profitability of your business in an adverse manner.

Perform Creditors’ Analysis

Contrary to debtors, the creditors are booked as a liability in the financial statements. It is equally imperative for you to perform the creditor analysis to uphold smooth functioning of the financial cycle of your business. Creditors must be paid off immediately the moment they become due. Failure to do so will catalyse a disturbance in your financial cycle. Moreover, it is also not advised to amalgamate the creditors for settling the dues in long-term. This on one hand will affect your relation with the creditors and make it difficult for you to settle the amalgamated dues on the other.

Make Detailed Budgets

Budgeting is the future appraisal of business cash-flows. Through budgets, you can set limits to the expenditure and appraise the revenue aimed to be generated in order to remain profitable. Budgets play an important role when they are compared to the actual results. And in case you receive adverse variances by comparing the budgeted figures with the actual ones, you can redefine your strategies to manage your expenses in a better way.

The bottom Line

Mentioned above are some of the important picks that I deemed important to discuss with the readers. By considering these tips, you can uphold the financial management of your business.

Julie Robert is a marketing analyst and loves to write on different topics related to business, property and travel.

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