Money Management: Why it’s Essential

Chalana Williams, First Federal of Lakewood

Money Management: Why it’s Essential

For a business owner, hanging onto your money and managing it effectively can make or break staying in business, let alone turning a profit and growing. Even if you have an accountant, you still need to know how to manage your money. That means understanding the basics of bookkeeping, making and keeping a budget, and paying bills on time.

Basic Steps to Managing Money

Use a business bank account.
Whatever the size of your business, you need a business bank account. All payments from customers go into it and all bills from suppliers get paid out of it.

Use an accounting system.
Set up your accounting books right away. Do it yourself using accounting software. You can farm the entire process out to an accountant, handle part of it yourself and have them handle taxes, or handle the entire process yourself.

Set up a payment system.
You need an effective way to accept money. The more payment options you offer, the easier it will be to collect what is due.

Offer credit sparingly.
Extend credit wisely and conservatively. Check the credit score of your customers before giving them credit, and be clear and consistent with your criteria.

Learn how to estimate a job.
Understand what your overhead is, how many hours a job will take, and the minimum you need to quote to make a profit. Track time and expense for every job.

Keep your overhead to a minimum.
Hire staff only when you can afford it and need them. When starting out, don’t set up your office in expensive quarters. Put extra money into areas that will produce a true profit.

Make a budget and stick to it.
Budgets provide structure. Base the budget on expenses from previous years, how the market is doing, supplier charges, and overhead. Include money for emergencies and to fund future growth.

Taking a proactive stance toward handling money radically reduces the risk that you will be caught by a big expense while letting you keep adequate cash flowing through your business to prosper and grow.