3 core areas to effectively manage business finance
Effective management and planning of business finances are crucial for a company’s success and growth. It helps ensure financial stability, facilitate strategic growth, monitor performance, and enable you to make informed decisions about your operations, investments, and future planning. Following are three important areas that you must focus on to improve your company’s cash flow and bottom line.
1- Financing options
Your small and medium-sized business requires funds for growth and expansion, but you may not have the necessary resources at hand. In such cases, you turn to financing options to obtain the funds. However, you must carefully consider your financing options to determine which one is best suited for your company.
Following are some financing options to consider:
- Business loans: Loans from banks, alternative lenders, or the Small Business Administration (SBA) can provide a lump sum of capital.
- Crowdfunding: Raising funds from a large number of people, usually via the internet.
- Angel investors: High net worth individuals who invest in startups in exchange for equity.
- Venture capital: Investment firms that provide capital in exchange for equity to companies with high growth potential.
- Lines of credit: A flexible financing option that allows businesses to access funds as needed and pay interest only on the amount they use.
- Invoice financing: A short-term loan that allows businesses to receive funding against outstanding invoices.
- Equipment financing: A loan specifically for purchasing equipment for the business.
Microloans: Small loans for startups or micro-businesses that have difficulty
2- Business accounting
Business accounting involves recording all business transactions to have an insight into the financial details of the business. These records are crucial for stakeholders, including owners, investors, and managers to assess the overall financial performance such as profit and loss, cost and earnings, liabilities and assets.
Managing business accounting offers several benefits, such as:
- Cash flow management
- Cost management
- A clear picture of the various aspects of your business’s health.
- Early warning signals
- Improved efficiency
3- Accounts receivable software
Accounts receivable management is an important aspect of business financing and it doesn’t have to be a painfully manual process. You can streamline the process of invoicing and receiving payments by using accounts receivable software. Such software helps improve efficiency, heightened security, and better management control. AR software also enables companies to securely manage customer data, monitor and control the AR process, and reduce the number of uncollected receivables, a key objective for many organizations.
Moreover, you can access real-time reporting tools such as dashboards to minimize the number of unpaid invoices and increase your overall collection rate, leading to better cash flow and a higher percentage of turnover. This, in turn, can improve key performance indicators and lower your order-to-cash ratio.