Hacks are simple tools helping you in complicated situations. As an entrepreneur, you are often confronted with administrative matters taking your attention away from your core business, but yet extremely important. Financial management is one of them. It is very important to keep your company financially sound, but a financial policy may not be entirely your cup of tea. It is obviously advisable to work with an accountant, but for some concerns you still have to take the time to understand and deal with them yourself.
A number of practical and simple points of interest can help you:
START NEW PROJECTS WITH A SWOT ANALYSIS
As an entrepreneur, you can and should evidently be enthusiastic about projects that can help you to move forward, but now and then pay attention to the risks and weaknesses of that new, exciting project. It is healthy to make a well-thought-out list of the strengths as well of the points where it can go wrong and the threats or opportunities. Forcing yourself into a SWOT analysis will broaden your view and lead to more thoughtful decisions.
BUDGET, EVALUATE AND ADJUST
Approach every project of a reasonable size with a budget. What does it cost? What will it generate for you in the future? Using a simple cash flow analysis, you can compare the initial expense with respect to future costs and income streams, and evaluate whether the project will give the right returns. This of course requires an assessment of future cash flows, subject to changing factors. Therefore evaluate your project regularly and adjust where necessary.
DO NOT MIX PERSONAL AND BUSINESS EXPENDITURE
As an entrepreneur, it sometimes seems easy or tempting to mix personal and business finances. In some situations, it may be interesting for tax purposes to develop structures optimizing your personal taxes or those of your company. However, with a view on taking-over or attracting new partners, such constructions can reduce the value of the company or create confusion. Discuss any possible inseparability of assets thoroughly with your counselors beforehand.
RESPECT YOUR PAYMENT TERMS
Considering yourself rich is not that difficult: bad cash planning can give you the feeling that you are doing good business while you are not. In that way, late payment of debts can give you temporary breathing space on your bank account, but in this way you often draw the wrong conclusions. After all, a lot of cash on the account does not necessarily mean that you are doing well. Moreover, late payment of debts can be an expensive option. It is often cheaper to close a short-term credit with the bank than to postpone that large invoice from your supplier, social security or VAT. Negligence interest, lump sum penalties and compensation clauses accrue quickly and certainly do not reflect interests at market rates. Moreover, the relationship with your suppliers can quickly deteriorate.
PEOPLE ARE YOUR BIGGEST ASSETS
In an SME you probably have a group of employees who each play an important role for your company. Moreover, they often form an important item in your profit and loss account. Take your time to govern your employees, to motivate them and optimize their remuneration. A stable, satisfied workforce is a hugely important asset that has a major financial impact.
ASK FOR FEEDBACK AND ADVICE
As an entrepreneur you really benefit from advice of third parties. People who look at your company from the outside with a fresh, uninhibited view are worth their weight in gold. Do not hesitate to surround yourself with honest advisors who have experience with financial management or human resources. Honest feedback on your plans can wake you up as an entrepreneur, make pitfalls (or opportunities) visible and ensure that you become aware of what you can still learn.
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