5 minute read
Business 101: Handling Finances
Ten things business owners should know about managing their money
BY JAMES HOLLOWAY
I
n 1996, after the release of the movie “Jerry Maguire,” everyone was walking around saying, “Show me the money.” If someone approached you today and said, “Show me the money,” could you show them where you spend and invest the money your business generates?
As a business owner, especially if you are the sole employee of the company, one of the last things you probably want to do is dive into a spreadsheet or a P&L statement to assess the financial health of your company.
Like many people, you probably pull up your online bank account and if there’s money in the bank, it’s a good day. If funds are running low, maybe you think closing one or two more sales will be sufficient. If that is the extent of your money-management plan, you may want to consider adding some or all of the following tasks to your to-do list.
Keep good records
QuickBooks, you have to keep the information updated on a daily basis. Use your online banking access to reconcile bank transactions on a daily basis as well (not just when you receive a statement at the end of the month).
Stay on top of billing
Send out invoices as soon as possible. Make sure your clients understand when payments are due and what, if any, penalties there are for late payments. If you do multiple jobs for the same client, use a unique invoice-numbering system so that you can easily identify which jobs have been paid and which jobs may have been missed. Don’t be afraid to follow up and ask about the status of a payment if you do not receive the funds in a timely manner.
Keep your money separated
Have a dedicated checking account for your business and never, ever use business funds for personal expenses. Likewise, avoid using personal funds for business expenses.
Calculate your BMOE
Once you know what your “bare minimum operating expenses” are for a typical month, you should set aside that amount in a secondary checking or savings account as an emergency fund as soon as possible. Your BMOE should include (but is not limited to) rent, payroll and payroll tax contributions, utilities and business insurance premiums. If you have this amount set aside and you have a slow month, or an accounting error by you or your bank causes problems with your primary checking account, you should be able to cover your costs for the month with minimal aggravation. As your business grows, it is likely that your BMOE will grow as well.
Find your golden goose
Most businesses develop a relationship with a small number of clients that can lead to ongoing revenue through referrals. These relationships are the proverbial geese that lay your golden eggs. Perhaps it is someone from your church, or an interior designer in town, or a member of a business network such as the Chamber of Commerce, but somewhere out there are your golden geese. Once you have those relationships, you should be careful to maintain and cultivate them because the long-term value of those clients can be significant.
Have a marketing plan
Not all businesses can rely on word of mouth alone. You might need to spend some money on advertising. To do that wisely, you need to know who your ideal client is and which advertising channels will allow you to reach them in the most cost-efficient manner.
Be a good steward of your money
Just because you can buy a new car doesn’t mean you should buy the newest model. The same thing goes for tools and supplies. Do you really need a $500 drill that has a GPS tracker letting you know where you left it on a jobsite, or do you just need to be more careful with where you leave your $100 drill?
Keep your travel costs to a minimum
Chances are that not all of your clients will live in your subdivision. If you do have to travel, try to schedule projects in similar areas on the same day. If you have out-of-town projects that will require an overnight stay at a hotel, you don’t have to stay at the sketchiest motel in town, but you don’t have to stay at a five-star resort either. Just because “the business will pay for it” should not be an excuse to be frivolous. Even if the business does pay for it, ultimately it is coming out of your profit.
Have a contingency file
Regardless of the size of your business, but especially if you are a one-man or one-woman show, you need to have a contingency file in place so you can provide your spouse or another trusted person with your bank account information, passwords, contacts and other information necessary to handle things if something were to happen to you.
Have an exit strategy
Unless you plan on working in your business until the day you die, you need to have a plan on what happens to the company when you are ready to get out of the business. Do you plan on simply closing the doors when you retire, or does the business have value that would allow you to sell it to another entrepreneur? What about if you were to die before you retire? Do you have a succession plan in place?
Managing your money and knowing where you stand financially does not have to be scary. With just a little bit of work and some attention to detail, your business can “show you the money” whenever you ask. z
James Holloway began his window treatment career as a full-time installer in 2001. In 2009 he started his own business, South East Installation Solutions, an “installation only” company based in Greenville, SC. His professional writing career began in 2013 with the launch of “TraVerse: A Window Coverings Blog.” He has also been asked to speak at various events including WCAA chapter meetings. His latest endeavor is the creation of a hands-on installer training facility. SouthEastInstalls.com TraVerseBlog.com Learn2Install.com
BESPOKE LEATHER
DRAPERY HARDWARE
