Whether you are running a small or large business, the one thing that keeps knocking in your mind is how to manage the finances in an efficient way to generate profit. Managing finances is a nightmare for small business owners. It’s all about balancing your checkbooks, or reviewing expense reports. The vital part of financial management is to have deep knowledge of fundamental laws of financial management. People who fears to face the ultimate truth of financial management of their small business can get the idea of get a grip on your finances by following below mentioned fundamental laws of financial management.
Spend Less Than you Make
This seems to be a simple rule to follow however the reality is just opposite to it. People or Small business owners who borrow money to manage their monthly expenses can never achieve their goal of financial freedom and thing will start losing control from their hands. This simple rule needs to know and practice, because sooner or later credit runs out. Make your budget carefully and take care of the money you bring for invest in your business or the money which left behind to manage your expenses. If you follow this simple path then you will be on right track of managing your finances.
Invest the Excess
After following the first rule, the second rule which needs to be implement while working on your finances is figure out the excess amount you are left with after meeting all your expenses. You have to invest the excess money back into your business, that’s what rule 2 says. Do think of using excess money for the new upgrades of equipment, hiring new talent, training program etc. etc. whichever you think is the best for the expansion and growth of your business. The ultimate goal of investing your excess money back into the business to attain profit potential quickly and reliably.
Know Where Your Money Stands and where it is going
You have to perfect rule #1 & #2 and then move ahead to see where your money stands means how the money is being utilized in the development of your business. If you have track of where your business money is going then you have not to worry about. You can engage yourself in other areas of development to make profit. On contrary of this if you do not have any idea about your business money then number can play tricks with you which result in to anxiety, depression stress and ultimately in bad business decision. Play an active role to manage your finances and live in peace.
By following above fundamental rules of financial management, you can control your finances and achieve the goal of financial management.
Norman Brodeur is a member of Private Capital Network (PCN) & Archangel Global investors’ aims to help aspiring entrepreneurs to raise a successful business.
