3 Proven Financial Management Practices to Implement in Your Business

Whose Today’s Guest?

Fred Mwale is Project Manager working in the Agriculture sector with a focus on Business Development and Project Management.

Understanding Your Business Model

Understanding the type of business model will help you design the financial plan that your business needs. The financial plan outlines everything that has to do with cash flow, savings, debt, investment, insurance, and any other aspect of the business.

The financial plan should be embedded in the growth plan of any business as this will help a business better understand and perfect the business model. Some businesses tend to offer goods or services on credit but a business plan will help highlight if your business is capable of handling such a model, determine the repayment rate and predict when to increase stock to meet the demand.

The downside to Selling Goods or Services on Credit

The worst-case scenario for any business involved in offering goods or services on credit is the business eventually dying out. This can be a result of the lack of positive cash flow coming in especially if it takes time for your clients to clear their balances. In such an event it may force businesses to start getting resources from the people it or worse still revert them to loans which will just make things complicated.

Attracting Customers that Can Buy on a Cash Basis

If your business is already running on such a model, then there is a need to start remarketing your products to your customer base and even prospects. The best way to achieve this would be the use of social media and putting it in a plain and simple way that the products and services your offering will be given on a cash basis.

Don’t get me wrong, am not advocating for you to completely erase giving goods on credit but rather I am advising business owners to have a limit on the amount of credit one may give without sustaining a huge loss, one may consider offering options such as lay-by to ensure that there is a consistent flow of cash.

Reinvesting

Good financial management is not about just being able to manage your finances but being able to reinvest wisely the profits that your business makes. In order to know what areas of your business to reinvest in, look out for the gaps that are in your business, and fill those gaps by reinvesting back in your business.

Financial Management systems

Financial management is a very simple process to undertake, most people think of very big numbers, excel sheets, and accounts but in the actual sense financial management is all about being intentional. You need to set time to sit down and look at your financial records and see what is happening in your business.

Business owners need to always keep track of all your records, these entail your invoices, cash receipts, etc. These records will help you look at your incomes and expenditures. As simple as this sounds, keeping records is one thing that SME’s fail to do but it is vital for any business.

Key Insights:

• Record keeping is essential for any business.
• Financial Management is about being intentional, set aside time to look at your financial records as frequently as possible.
• No business can survive on a business model based on credit alone. Find other ways of implementing credit limits and ways of keeping your cash flow active e.g. lay off.

“Many people think that financial management is all about big numbers, excel sheets and accounting software, but it’s actually about being intentional about wanting to know about your finances”