Introduction
You may want to have a startup initiated. It can be a small-scale business entity or a medium-scale enterprise. You may either go for a manufacturing hub or foray into providing valuable services for your clients. While aiming to do so, you must keep yourself abreast of effective financial management strategies.
This way, you can build the seed capital you need for building or starting your business entity. Without proper planning or strategizing, you cannot skew your business in the right direction.
On this note, let us get you started with the top 10 effective financial management strategies that you learn and further implement. Helping you get started through the same:
1. Setting up financial goals
The first step in strategic financial management is to chart out the financial goals or objectives you have in mind. You may have to analyze if these objectives could be achieved on a short-term, medium-term, or long-term scale. This way, you outline the purpose facto-sheet before you draw up budgeting numbers for achieving your dreams or aspirations.
For instance, you may have to get working capital to fund your digital marketing initiatives on social media or pay your team to build your company’s website. You may have to invest money in Google Ads to promote your fleet of products or services.
Writing them down can ensure you get a realistic financial figure for all the activities you plan to do initially for your business entity.
2. Measuring expenses
This is the next step for you to formulate. You must write down a measurable tangible for the financial goal you have in mind and the budgeted figure you have in mind.
Say for instance- Digital marketing initiatives and ads- $2000
Google Ad Sense to promote products- $500
Pamphlet creation- $1000
This way, you add realistic figures to achieve your tangibles and the budgeting process can shape up your dreams on a more achievable parlance.
Measuring or tracking expenses by entering tangibles vis-a-vis the cost factor also helps you stay on track and not go out of budget.
3. Steps involved in real-time expense tracking
You must build real-time steps concerning expense tracking. This way, you make a well-defined use of every penny you have and do not waste money on unutilized services. Here is the run-down of steps that are connected with real-time expense tracking:
1. Making use of technology
You can leverage the use of technology while you get into the expense tracking process. This way, you make sure every expenditure is taken into account and not missed out.
Look for tech apps that connect with your bank account. The summary gets tracked and you know what tangible is spent for what amount. You can also integrate apps that can accentuate your financial performance in the long run.
2. Categorizing your spending habits
- Fixed expenses
- Variable expenses and
- Discretionary expenses
1. Fixed expenses
Fixed expenses are the expenses you may have to provide for essentials connected to running your business entity. Say, for instance, the purchase of raw materials from your suppliers can be a classic example of a fixed-expenditure category. Similarly, your Google Ad-sense expense relates to spreading the goodwill of the brand. This can be a fixed expense mode.
2. Variable expenses
Do you want to give extra discounts to your members or give prizes to contestants? This can be a variable tangible you take up when your business has made enough profits for the quarter or the month.
Similarly, you can curate other overheads that are necessary but can be taken up at a later point in time. These expenses are variable overheads and would not come under fixed or necessary kinds of expenses.
3. Discretionary expenses
These are types of expenses that are discretionary. For instance, you may want a design theme for your brand-new office. An interior designer may charge you about 1000 dollars per visit.
As a newbie start-up owner, you may as well use your own imagination or DIY hacks to decorate your office cubicles or home-cum office lounge spaces. Therefore, the willingness to shell out the money for a designer or to do it yourself lies in your sole discretion. This is an example of an expenditure that lies discretionary.
When you bifurcate expenses this way, you can plan your expenditures in a more prudent and well-informed manner.
4. Making way for an emergency financial blanket
When you are making reasonably good inroads with respect to building financial stability for your business, you may get a bizarre set of setbacks or obstacles throwing you off the gear. The unexpected expenses that come your way can be in the form of car bills, hospital bills, or home refurbishment expenses where you divert a bulk portion of your dispensable income towards each of them.
Therefore, it becomes necessary for you to set up emergency funds or pave the way to investing in short-term investment options so that you balance your finances between your business objectives and personal life.
Opting for short-term investment schemes goes a long way in helping you balance your cash dispensable like a pro. You can take valid cues from experienced wealth or finance managers to help you establish an emergency financial blanket so that your business money doesn’t suffer in lieu of the same.
5. Building debt avalanches
Managing your credit card balances and handling cash reserves can be tardy and give you sleepless nights after all. By building debt avalanches, you can snowball between your credit card debts and address your cash holdings in a balanced manner. Here are tips you can make use of:
- Try making credit card payments using the minimum dues. This way, you are not charged excessive interest rates on account of delayed payments.
- To offset your payments, getting another credit card with more cash-back offers or reduced interest can be done by you as such. The cashback can be diverted into your bank balances to improve your cash holdings.
- Try negotiating payment plans or avail loans that can be slabbed at lower interest rates. You may have to do some shopping around via online websites or dial-up known finance partners to help you with the same.
- In a nutshell, the right kind of financial planning is utilizing financial resources in the right manner.
6. Diversify your investment portfolio
While trying to manage or save your cash reserves, you may always find that something or the other crops midway hampering your cash balances and leaving you with no fixed or working capital money to run your business organization. Therefore, when you aim to save money there are hiccups involved in doing so.
Investing via different avenues is also subject to the volatility of market conditions and you never know if you get your investments back.
Therefore, you must build an investment portfolio with a diversified composition of financial or investing instruments so that the loss in one option offsets the gain in the other and your portfolio remains intact until redemption.
In a crux, every business owner must invest in safe and reliable investment portfolios to handle cash-deficit scenarios or other financial inadequacies in a precise manner.
7. Preparing the final cash budget for your business entity
After making a thorough overhauling of expenses as fixed, variable, or discretionary and after reviewing the cash cum bank balance reserves you have set up via varying budgeting statements, now is the time to put everything together.
You must prepare an income-expenditure cash budget that details every expense you incur vis-a-vis the income resources you may have to contemplate the situation.
You must evaluate every minute expenditure and gauge incomes to get a correct overview of your final cash budget statement you can use for your business entity. You can ask your finance teams to curate Excel sheets so that every expense and income factor is documented and not lost track of.
Strategic management or tactical financial management strategies help you achieve your business objectives on a steady and successful note.
8. Reviewing your budget via auditing
You can conduct periodic audits to see how you can manage expenses and earn income from your business-building objectives. The financial budgets must be reviewed from time to time.
You can ask the Excel team to build formulae so that changes or reviews get updated instantly and your available cash reserves pop up instantly. By creating data tables or AI tables for your work or financial data, you can keep things on a more organized or streamlined note.
Therefore, constantly reviewing your budget data and conducting periodic audits make sure that your money reserves are not going in a wasteful direction and are only utilized for building the brand of your company.
You can also submit these audit reports to your stakeholders or financiers so that you build the credibility of your brand in a robust manner.
9. Seeking professional advice on building your finances
You must approach professional help in terms of hiring a financial specialist or have a word with a wealth manager or an investment banker to build up your investment portfolio in a manner that would support you through your personal or business requirements.
Being a newbie investment seeker, too many options can throw up that can lead you on an overwhelming note. Taking professional help from solicited authorities can help you formulate a customized investing plan that can take care of your immediate and medium-term business strategies in a hassle-free manner.
You can discuss capital planning strategies to help you through the process of managing the finances in a streamlined manner.
10. Follow up action
This is the final step in prudently building your financial management strategies. You must regularly review how these strategies are allowing you to implement your objectives in real-time.
Hence reviewing your plans and taking the needed follow-up action can make sure that you are on the right track and that you are keeping your correct foot forward with respect to implementing your strategy. Right financial decisions can make your business line while wrong moves can break it.
Key takeaways from impactful financial planning
- You must follow strategic plans to frame your long-term goals in business and professional lives.
- You must take time to ensure your decision-making objectives are moving in the direction of aiming for profitability or achieving company targets in a well-dispensed manner.
- You can build your capital structure through a cash flow analysis or by approaching shareholder cum financial firms.
- Financial systems and processes pave the way to better financial controls and these strategies are responsible for helping the business grow. The benefits of strategic planning can diversify the horizons of bagging future investment from shareholders or stockholders too.
- The objectives you set in the beginning help in the smooth flow of business activities in the long run. You must clearly skew out objectives of strategic financial management via the curation of Excel sheets or cheat sheets.
The Bottom Line
Planning your finances is a very important step to fulfill your goals and aspirations. And embarking on a suitable investing plan can keep you in a better stead over not planning at all.
Every investing plan is subject to market risks and therefore it is always a wise idea to read the terms and conditions as stated on the initial offer documents before you sign in on the dotted lines.
