Every entrepreneur and SME player needs to understand how to manage and organize finances to have good management and a continuously running business.

SME players must have the ability for financial management. Money management is the process of handling business finances through budgeting, business goals setting, tracking expenses and income, and investing.

With a good money management plan, entrepreneurs and SME players can avoid cash flow problems and ensure that the business is on the right track to generate profits.

Those who fail to manage money wisely may face issues such as late payments, running out of money, and failure to make collections for business receivables.

Quoted from patriotsoftware.com on Thursday (November 16, 2023), here are 9 ways to manage your business finances:

1. Always Follow Deadlines:

If you start a business by borrowing capital from a bank, you need to meet the set deadlines. Therefore, you need to know the billing date and set aside money from the day before the deadline so that there are no obstacles during payment.

2. Monitor Expenditures:

Many business owners have multiple accounts, such as checking accounts, savings accounts, and credit card accounts. Make sure you know how much you withdraw or spend from each account to keep track of the account balance. It's easy to use business credit cards, debit cards, or checks to cover small expenses. Track your expenses by managing accounting books, and you can use simple software to record accounting transactions. When you have expense records, you can easily monitor expenses.

3. Don't Forget About Receivables:

If you offer credit to customers, you are well aware that you may not receive money for sold goods or services until the due date or later. After a week or a month, receivables can easily be forgotten. However, if you want to manage money better, you have to remember the funds owed to your business and make collections. To help you remember receivables, record them in your books. Create a receivables summary to track total receivables. The receivables summary shows which customers owe money to your business, the amount to be paid, which customers are overdue, and your total receivables.

4. Separate Business and Personal Funds:

Do you have separate bank accounts for business? Although you are not required to separate business and personal funds, this is important for money management. In addition, business bank statements are useful for tracking profitability, reconciling your books, and monitoring expenses. Combining personal and business funds can result in irregular records, causing excessive spending and missing growth opportunities. When you combine funds, tracking business funds withdrawn and saved becomes difficult, making it difficult to monitor cash inflows and outflows. If your business and personal funds are in one account, you may be inclined to set aside business funds for personal expenses or vice versa.

5. Time Your Purchases:

To avoid low cash flow, time your purchases. Don't make unnecessary purchases until you pay the bill. And wait until you have enough money to cover new expenses. You can also time your purchases to reduce your tax burden. Before the end of the year, you might consider buying items that can reduce taxes (such as inventory) so you can claim them on your tax return.

6. Create a Budget:

Taking the time to create and follow a small business budget can simplify the way you manage money. The budget helps you set spending and income goals. Your budget outlines the costs needed to run your business. When you know how much you can spend, you can more easily manage your spending money. Budgets also estimate the amount of income your business will receive. If your income turns out to be lower than budgeted, find ways to cut expenses and increase income.

7. Manage Inventory:

Track how much inventory you have in your business to avoid crossing the line between having too much and not having any. Record purchases and sales of inventory in your books and take the time to monitor how much you have before ordering more.

8. Trim Costs and Increase Revenue:

Two money management tips are easy to do but difficult to implement: cut costs and increase revenue. If you're having trouble managing business funds, find ways to cut costs and increase revenue. To cut costs, analyze your current spending by looking at areas and amounts of current spending, cut and eliminate frills. You can also reduce spending by finding new vendors.

9. Have Cash Reserves:

Implementing money management tips into practice can significantly improve cash flow management. However, sometimes unexpected things happen, and you have to bear emergency costs. Maintain a small business cash reserve to help you manage money in emergencies. You can start a cash reserve by opening a business savings account. Be sure to regularly deposit into your cash reserve.