Business Money Management
Entrepreneurs who are concerned with business money management have many resources available that can help them get a grasp on what can be a complicated issue. There are many software systems that can help small businesses keep track of finances and function efficiently. From creating a budget to handling invoices, these products offer a variety of functions that can keep the many details of day to day commerce under control. Aside from software products, the services of qualified professionals can also help companies create budgets, handle such issues as cash flow, accounts receivable, payroll issues, and any number of company related monetary concerns. Attaining capital is very important for any company, and all the more so when a new venture is launched. Handling business related debt while having enough cash on to keep things rolling along smoothly can be a challenge for even the most seasoned industrialist. A successful organization will have a solid system in place to handle all issues pertaining to commercial capital administration. These concerns go far beyond basic bookkeeping. Decisions on such considerations as how to deal with debt, bringing on investors, how to handle customer payments, how to attain needed supplies, how to maintain cash flow, and what type of accounting system to use all fall under the heading of business money management.
There are certain steps that should be taken by any new company in the beginning stages of business money management. A first step would be to open up a bank account that is dedicated to business purposes only. Handling any kind of company finance issue through a personal bank account is never a good idea. Several things will be required to open a company bank account including personal identification, as well as the company's license and name registration papers. An entrepreneur will need to decide whether or not they wish to handle all bookkeeping and accounting responsibilities themselves or hire a professional. For those who prefer to handle this area on their own there are many accounting software products that can be utilized. Decisions on the type of venture that is being established can also have an impact on business money management. If a company is a sole proprietorship, this means that it is managed and owned by one person. This type of organization is relatively easy to create and is subject to fewer regulations. A partnership, on the other hand, will consist of two or more owners. Generally, articles of partnership are drafted for this type of venture. The obvious benefits of joint risk and collaborative contributions will apply here. However, should the partnership need for any reason to dissolve, both partners may pay a heavy financial price.
The ability to process customer payments is another key element of business money management. Most customers expect to be offered a wide variety of choices when it comes to payment options. Being able to offer a fabulous product will not be of much use if the customer finds that paying for the product is difficult. For this reason, most successful companies will be able to accommodate a wide variety to choices in this area. These choices could include credit card payments, debt card payments, cash payments, and electronic payments. Ordering items online for home delivery is another option that will increase sales. There are many services that are available to businesses that can help out in this area. Of course, these services will also come with certain fees and terms attached. The wise organization will compare prices and terms before selecting the service that best meets their individual needs. With all of these high tech payment options, there will still be customers who prefer the written check. The art of passing bad checks is an old one, but still a popular one. For this reason, most businesses require that customers who are making a purchase with a written check present some form of photo identification along with a driver's license number. Large checks should generally be certified. With today's technology, the ability to check for sufficient funds is much easier than in days past, which can go a long way toward simplifying business money management.
Cash flow can be an important concern for any organization. Handling cash flow wisely can be a crucial factor in business money management. Obtaining accurate information on how funds flow in and out of a company is a good place to start. Making good projections of how funds will flow in the future is an equally important priority. The amount of cash on hand along with any funds that will be coming in from service fees, payments from customers, earnings from interest payments, any money that is collected on defaulting accounts, plus any number of other sources can make up the sum total of cash that is coming in to an organization. This total will obviously be offset by any cash outlays that a business will be making. These outlays can include overhead expenses such as rent, utility bills, office supplies, payroll, advertising, taxes, employee benefits, maintenance on company equipment or vehicles, monthly payments on debts, and other expenses.
To deal with all of this vital information, some type of accounting system must be established that will handle these business money management issues. There are different types of accounting systems that might be utilized. Double entry, single entry, cash basis, or accrual based systems make up a basic list of possible systems. Whatever choice an entrepreneur might make in this area, accurate oversight is very important. The Bible often describes the believers desire to keep words and thoughts that are pleasing to God. "Let the words of my mouth, and the meditation of my heart, be acceptable in thy sight, O LORD, my strength, and my redeemer." (Psalm 19:14)
Capital Budgeting ProcessFinancial planners recommend developing a capital budgeting process for small and large businesses to ensure long-term success. In today's economy, it takes money to make money and it takes making wise choices to stay on top. Whether large or small, no business can operate efficiently without implementing a long-term plan to invest monetarily in equipment and facilities to expedite the corporate mission and increase profitability. Improper planning results in failed enterprises and a loss of resources; but proprietorships and corporations which make prudent decisions about what, where, when, and how much money to allocate to new facilities or improve on existing ones will have a fighting chance at staying in the black.
Chief operating officers and financial managers should be able to assess corporate needs based on available resources and long-range goals. For instance, smaller businesses may feel that they cannot afford to invest in overhauling an antiquated computer system to track assets and personnel. However, when that antiquated system results in a loss of productivity due to system shutdowns, the small business can't afford not to invest in more up-to-date technology. The capital budgeting process requires a realistic assessment of the value of equipment, facilities and people. However, sometimes men place a great deal of value on temporal things and not on the eternal. "While we look not at the things which are seen, but at the things which are not seen for the things which are seen are temporal; but the things which are not seen are eternal" (II Corinthians 4:18).
The capital budgeting process may vary between corporations, but the principle remains constant. The goal is to assess current operating procedures, equipment, personnel, and capabilities; investigate other more cost effective means to increase productivity and profitability; and devise an investment proposal which makes a good case for improving or expanding facilities. Chief operating officers and financial managers will want to do some homework to prove to CEOs and directors that an investment in new facilities and equipment will translate into increased profits. Corporate budgets will also include suggesting proposed expenditures for equipment upgrades, along with a comparison of the benefits and costs associated with an alternative. Accountants may be called on to project a rate of return. CEOs will want to know how soon after implementation will the new technology or equipment begin to turn a profit. Will the expansion include renovations or additions to the physical plant? The corporate budgeting process will also take into account downtimes required to change out older pieces of equipment and replace them with newer models. Accountants will have to compute lost man hours and productivity due to facility or equipment expansion or replacement.
Unlike individuals, a corporation's capital budgeting process must plan for the long term, rather than basing buying decisions solely on industry trends. While technology has changed the way most businesses do business, companies must be in a financial position to expand operations. One of the most prevalent factors in business failure is expanding too rapidly or investing too much capital too soon without conducting a feasibility study or computing a rate of return. For example, a small business owner may feel that their sidewalk cafe is doing so well that opening up a second location across town will pay off big. But, the overhead expense for a relatively new business trying to expand could put the entire enterprise in jeopardy. A long range capital budgeting process includes not only doing a feasibility study to assess customer buying trends and potential income earnings in a specific location; but also addressing future city planning and zoning projects and regulations which could either drive traffic to the proposed site or deter potential customers from stopping by. City architect or private developer plans to build a strip shopping center nearby could boost business; but plans to locate a strip tease joint in the neighborhood would only deter targeted consumers from frequenting the new enterprise.
Once corporate financial officers have completed a feasibility study and compared the returns and expense of acquiring or renovating new facilities or equipment, finding a funding source or allocating monies is the next step in the capital budgeting process. Depending on corporate budget constraints, existing expenditures may have to be reduced to afford expansion. Departments may be required to lay off employees for a period of time while new equipment is being installed. The logic behind layoffs when plants and corporations expand is to balance the budget between payroll and overhead. Layoffs may also occur when new facilities or machinery has the capability of replacing workers and increasing productivity. Unfortunately, progress sometimes means the loss of a paycheck for seasoned workers who have been on the job for years, but automation and technology often make them and the equipment on which they work obsolete. Forced retirement or personnel reassignments are part of the overall capital budgeting process which seeks long-term profitability as its bottom line.
Companies may also derive resources for investing in new facilities or equipment by selling company stock or conducting a capital campaign to raise funds through shareholder or investor contributions. The capital budgeting process sometimes includes selling older equipment, vehicles, and machinery at a profit and re-investing capital into newer, more improved models for greater efficiency. Some older equipment can find its way into foreign markets, especially those of lesser industrialized nations which lack adequate capital and machinery. Corporate financial officers and managers will explore all options to ensure that businesses and employees remain intact during the transition into the Electronic Age of fair enterprise.