Ways you can adopt to make your financial strategies worthwhile
The urge to do your own thing, even if you are working in a salaried job takes over at some point of time or the other. You wish to become an entrepreneur then. But “doing your own thing” isn’t always as easy as it sounds. There are a lot of considerations that you have to make if you want to start a small business. The first hurdle on your way is how to finance your small business. This is the prime concern of all those who want to start up a small business. Few have the required resources needed to commence with your own small business and thus have to take loans. If you own a property then you can take out a second mortgage on your property and finance your small business with the cash. However, you should remember that second mortgages are secured loans and hence even if you get a lower interest rate, you have to pay back the mortgage as defaulting would mean your house getting foreclosed. Here are some strategies that you can follow to improve and manage the finances of your small business.
1. Cash flow management – Business is not about showing on paper how the income statement and balance sheet look like, it is about managing the cash properly so that your business does not go under. A part of the underlying financial strategy of your business plan should have the detail of how to use cash in the business. The steps included are, deciding on an amount that you will always keep as reserve and how you can pay your major expenses. It is very important that you lay out your financial cash strategy before time and it will help you to make better financial decisions such as when to write a check and when to access a line of credit.
2. Plans for collecting receivables – It is extremely important to manage the receivables of your business otherwise the effect can be quite devastating on your finances. You should chalk out a detail of your financial plan as a part of your collection strategy. You may have to appoint your in-house staff to follow up with the customers who are overdue or turning them over to an outside agency. It will also identify the amount of late fees to be received and whether there are due deposits before you deliver products and services for new customers.
3. Detailing of purchases – All the purchases that you make through business, especially the large ones should be done as per detailed guidelines on the business plan. This will help you to determine the purchases that you can make through cash or through a credit card. With this strategy you should also outline the strategies that you can take in order to take advantage of the terms of suppliers. Along with these the purchasing strategy should point out whether approval is needed by manager or board if more than a certain amount is to be purchased.
4.Consider your investment strategies – It is always not possible to write down in details a specific investment strategy, but you should give general guidance to management. This will include basics like the percentage of money you will invest in high-risk portfolios vs. portfolios with lower risks. Investment planning should also include guidelines of when approval would be needed in order to make changes to present investments, liquidate investments and to cover business necessities.
The financial strategy that you draw out for your business plan should be a general guide on how the business will work. This should be enough of a guideline in order to direct the basic staff associated with the business for conducting all the financial aspects of the website.