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Cash mismanagement is more common in businesses than you might think. Plenty of business owners find it hard to manage their cash flow and keep things balanced. If you are one of those struggling, there are a few ways you can improve your finances.
Hit Your Deadlines
If you do not know when bills, such as loan payments or vendor payments, you won’t know whether you have the cash to cover them. If you do not know which bills you have or when they are due, you could get hit by interest or later fees, and this affects your business credit, making it harder to take out a loan in the future. Staying on top of deadlines can help you foster better relationships with your vendors and creditors.
Create a system that works for you or hire someone to manage the finances for you. Write down due dates and use a spreadsheet to keep track of what you owe and whether you have paid it back yet. Keeping track of deadlines is especially important when it comes to vehicles in your fleet. Many business fleet vehicles are considered commercial, but the FMCSA has a stricter definition. If yours are considered commercial, you will need to hit certain deadlines to stay compliant, which can save you plenty of money. You can learn more about what a commercial vehicle is and what regulations you might be required to meet.
Keep an Eye on Spending
If you do not know how much you are spending each day or month, you won’t be prepared to outsmart economic downturns or know if you are ending up with bills you can’t pay. Not monitoring your spending closely can cause you to misuse funds and overspend in areas. You likely have more than one business account, such as savings and checking. Know how much you deposit and spend from each of those accounts and know roughly how much is in each one at all times.
Watch Out for Accounts Receivable
Offering credit to customers can make it more attractive for them to do business with you, but this also means you will not receive the money for your services or goods until well after the due date. It is easy to forget about outstanding balances, but managing your money well requires you to stay on top of the funds you have not yet received. Use accounting software to keep up with this and summarize all current accounts receivable.
Keep Personal and Business Funds Separate
If you do not yet have a separate account for your business needs, now is the time to set one up, even if there is no requirement to do so. Having separate business statements will help you reconcile the numbers and see how profitable you are. It is also another way of monitoring your spending. If you mix things, you could end up being disorganized, and you will miss important opportunities for growth. Having everything in one account might also lead you to use business money for your personal spending.
Reviewed and edited by Albert Fang.
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Article Title: How Businesses Can Avoid Money Mismanagement
https://fangwallet.com/2023/07/15/how-businesses-can-avoid-money-mismanagement/The FangWallet Promise
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