What is at the epicentre of every business? Money of course. So what is the one area of your business that should get special attention? The finances.
The first step is to understand basic finance terms, like assets, liabilities, capital, sales, cost of sales, expenses and profits. These make up the bottom line of every business and should be familiar to you even if you’re not totally comfortable with matters relating to accounting. Even a basic understanding will serve you well and help you to make better decisions for your business.
Once those terms are mastered, be sure to keep these tips in mind:
Spread the risk
Never depend on only one or two big clients to keep your business going. These clients can move on to a new supplier at any stage and take their money with them. Invest time and effort into smaller clients as well. They’ll generate a steady stream of income for your business, which will soften the blow if and when the big money spinners move on.
Insurance might seem like a dark hole money is disappearing into every month, but you’ll be glad the money was spent when the time to claim comes. Machinery, stock and site repairs can set you back thousands – if not millions – if you have to pay for it cash, but having proper insurance will delete a lot of those zeros.
Insurance types you should look into are building insurance, insurance against theft, fire and accidental damage, and personal accident and public liability insurance. There are many insurers to choose from in South Africa, so securing a deal that suits your pocket is definitely possible.
Stay on top of things
There are many factors to be aware of when it comes to the finances of a business, but you have to stay on top of everything to make the books balance at the end of the month. For instance, get paid and do payments on time, keep track of all overheads, invoices and receipts.
Easier said than done? Then hire an accountant and automate transactions. Debit orders, like those Digicash offers, ensure that customers pay on time. You won’t even have to do the reconciliation – it’ll be done for you.
Heed the 80/20 rule
The 80/20 rule states that 80% of results in business will come from 20% of the input. That means 20% of your marketing efforts are bringing in 80% of your business, 20% of your sales staff generates 80% of your profit, and so on. Find out where these 20% sits in your business, then invest time and money in it. Get rid of or limit the rest to increase efficiency.
Be easy to find
This last rule is not directly related to finance, but it’s worth a mention, because if people don’t know your business exists how are you expecting to make money? List your business on local directories, spend money on developing a website that ranks high on search engines and consciously develop your brand name. You don’t have to do everything at once – start with a website and build your business from there.