Financial Management Of Successful Entrepreneurs

For entrepreneurs, reading trial balance, profit statement and balance sheet is not easy, but Parsons is right.

When you start a business, you can't just consider those numbers.

In fact, the definition of your success is how to integrate numbers into everyday business decisions.

Here are six secrets of financial management from today's top entrepreneurs.

For growing companies, profit is not the best indicator of the actual operation of Forecast Ltd.

In fact, profit indicators are often disappointing.

MattRiSSEll, chief executive of TSheets, said, "a new company or fast-growing enterprise will burn money very quickly."

If business is booming, you will find that your cash reserves are much faster than expected.

Your profits may be relatively low, but that may be a good thing, because business growth is very fast.

On the contrary, calculating the growth rate of the company's business can tell whether the company is developing on the right road.

Remember, profits remain the ultimate financial goal of the company.

There are some general financial indicators applicable to all enterprises (such as income, expenditure, cash and gross profit, etc.).

But Joshua Reeves, chief executive of ZenPayroll, suggests that businesses consider their own financial indicators, including those key indicators.

"For example, in a subscription based company, there are two very important indicators: customer lifetime value (LTV) and customer acquisition cost (CAC).

LTV helps you understand your customer value, and CAC measures how much cost you need to get these customers.

Tracking these two indicators in various channels can easily measure the profitability of different channels and focus on the best channel. "

Pay close attention to your business model and draw on the industry's peers to define your own proprietary indicators.

What are the unique indicators that your industry needs to pay special attention to?

When everything is available on the business platform, you can easily make mistakes, which will cost you.

What kind of mistake should you pay attention to? A perfect example, Parsons said, "manage your accounts receivable, prepare the agreement ahead of time, encourage customers to pay as early as possible.

The money you get now is more valuable than the money you get in four months.

The sooner you deposit money in a bank, the more interest you receive.

If you can defer payment or postpone payment, you may collect late fees or collect arrears.

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Many small businesses failed to do so, and they lost the money they could put into the bank.

Are there any other mistakes that can cause you loss? You may have missed the credit card repayment date, or you may have to pay a fine for late payment to the supplier.

Take some time to improve your business processes and identify potential areas of potential losses.

If you are not sure, you can ask your accountant and bookkeeper for help.

Rissell said, "my last company has more than 30 employees and four office locations.

I found that all employees (or even the most loyal employees) would work on their own time sheets, which would bring me $2300 in extra wage costs per month.

For a small business, these figures add up to no small cost.

With the continuous expansion of the company's business, the super branch will gradually become a problem, and you will not have time to monitor the flow of each piece of money.

But taking time to manage finances is still important.

How to do it? Quarterly cost audit.

Conduct a careful audit every quarter to see where your money has been spent.

Can you confidently say that you don't overspend? Are there any software applications or services that are not needed and can be cancelled? What other aspects can reduce costs? Four such audits can help you save thousands of dollars a year.

"The budgets of small business owners tend to be tight, which leads to the" do it yourself "mentality," Reeves said. "However, the most valuable resources are often their time.

Entrepreneurs have to keep thinking about whether they spend their time in the most important business.

For example, if the owners spend three hours a week manually managing the payroll, they may think that it saves the cost, but it actually costs the time and effort to grow.

Believe it or not, the cost saving method of "do it yourself" actually wastes more money.

This is also the reason why technology plays an important role in small businesses, which enables you to outsource complex tasks or achieve automatic management.

Rissell recommends, "business owners can step back, give up the first line of work, and instead evaluate how to upgrade technology.

If possible, use cloud based solutions and trusted consultants to solve this problem. "

Technology may bring upfront costs, but the time and money saved after it can offset the initial cost.

Which business processes can be automated to liberate your time?

What is the key to simplifying financial management? Develop a system to track financial situation for a long time and set goals for you.

As Parsons said, "if you don't know your goals, you will miss a tracking data point.

Your system needs to include your needs, actual completion, and the comparison between previous and previous years.

If you want to succeed as much as possible, your system must contain the above 4 data points.

These data will make decisions easier and improve the likelihood of success. "

Such a system will not only help to verify future financial decisions, but also help enterprises improve their financial health.

Entrepreneurs should not be too comfortable, otherwise the growth will stop.

As an entrepreneur, if you want to succeed, you don't need to be a financial genius.

What matters is that you work hard towards finance.

Take time to understand which indicators are most important to business, and how to measure and improve these indicators in the long run.