The following are some simple financial management tips that you can do to manage your small business finances effectively.

Understand financial bookkeeping

To manage your books effectively, you need at least 5 separate ledger accounts that record each transaction.

The book of accounts needed is a cash flow book that contains records of incoming and outgoing money, an inventory of goods, a purchase and sale book, an accounts payable book, as well as a book of costs and income other than the sale of goods or services.

Also make sure you learn an alternative to the excel application for easier, simple store bookkeeping, namely Mekari Jurnal.

Separating business finances from personal finances

In general, the main factor for small business bankruptcy is not separating business finances from personal finances.

If you do this, then it is not clear which money is for business, and where is money for personal use.

You can take a salary from the profits of your own business for personal use.

Often, small business actors do not separate their personal finances from business finances.

The reason is because the business is still small, so it is considered not yet complex.

Even though this is a fatal mistake that can lead to business failure.

Plan the use of money well

As a businessman, you must plan for the best use of money, especially when you have more capital than you have calculated.

You should not waste money even though your business cash balance is in a position to have more than enough funds.

Adjust the spending plan with sales targets and cash receipts as best as possible.

You can postpone capital expenditure plans if they do not provide the benefit of increasing sales or lowering costs.

Next, you need to do a cost and benefit analysis to make sure that the use of your money will not be in vain and can provide profitable returns or increase business profits.

Perform cash turnover effectively

Don’t just focus on profit, but how to manage business finances also includes how you manage accounts payable, accounts receivable and inventory.

Many businesses are experiencing cash difficulties even though their accounting records show good numbers.

Pay attention to how you turn your cash, because cash flow will slow down if the credit sales period is longer than the purchases, or if you have to keep a stockpile of merchandise.

You must strive for the same credit sales terms as credit purchases, and you must also be able to reduce inventory levels in such a way that you can still fulfill orders without burdening your finances.

Ensure profit calculation

Your goal as a businessman is to make a profit with little capital.

But do you know how much profit has been obtained from the business?

Calculating profit correctly is as important as generating profit itself, where the most crucial part in calculating profit is calculating costs.

Most of the costs are identifiable because they involve cash payments. But some others are not in the form of cash, such as depreciation and amortization.

Then some have not happened yet but need to be reserved for future issuance, such as taxes and interest on loans.