Organize your business profits

Establish a financial routine and direct your profits and investments in the right direction!

 

Among the must-have hard skills of an entrepreneur, understanding financial management processes is one of the most important aspects of business ownership. After all, knowing how to manage corporate profits is what distinguishes those entrepreneurs who remain competitive in the market from those who do not evolve.

In this article, you will learn about basic methods for reviewing your finances, starting a business on the right foot, and investing your money in the right wisely!

#01: Know your business and organize its data

In any market segment, knowledge and organization are crucial to success, and having economic difficulties is no exception.

Whether you want to understand the big picture or connect information to solve a problem, you need clear and useful data. Thus, establish a few practices and then plan your future moves from there, starting with:

Knowing your business's cash flows

First, you must determine how much money your company makes and how much you earn as a professional. Organize this essential information, write down everything related to your business, and base it on a few calculations. See:

• List the fixed costs of the business: Include everything it requires to run during the month, such as rent, employee salary, internet access, and so on.
• Write down the variable costs per sale: Make your investments apparent by considering raw supplies, packaging, card machine fees, freight, and other charges.
• Find out the profit percentage per product: Subtract the variable cost from the product's selling price, then divide the result by it.
• Find out where your finances stand: Calculate them by dividing the monthly fixed costs by the profit margin per product.

Remember that this information will be used to limit spending. In this sense, you may organize them using a spreadsheet or a trusted tool. After all, automation simplifies the management process significantly.

Making daily notes and maintaining an ordered routine, tracking all income and spending, and categorizing expenses will prevent you from losing essential information and save you time when you need it.

Separating your personal and professional profits

Like anyone else, you have personal expenses that must be paid. That is why you need to establish your compensation and manage the business separately, with estimates based on your financial reality. Therefore:

·       Transfer this money to your account and consider it a fixed monthly payment for an employee.

·       Open a professional banking account as a Legal Entity and use it for all business-related activities.

#02: Think about how to use the money

With good organization, your company's actions may be carefully considered and implemented. This makes future activities more secure and predictable. Then:

Plan your cash flow

To avoid unplanned events, plan your fixed income and expenses at least three months ahead of time and stick to them. Furthermore, if you anticipate some volatility, plan activities to mitigate its impact.

As the days go by, update this material with the current data, determining whether the scenario you planned matches reality, then align your next steps.

Have an emergency savings account

Having money stored helps to prevent crises. Ideally, you should have 3 to 6 months' worth of fixed costs saved, which are defined as fixed expenses that may be invested without disrupting your plans.

If it is possible, keep this money in a separate account, with or without income, and only use it when there is no alternative.

Reinvest with conscience

An interesting idea is to gradually reinvest part of the profit, either in improvements or expansion. But, before you make any decision, you should consider whether it will pay off or take time.

Therefore, evaluate what is a priority among your company's demands and set a monthly percentage for reinvestments, while simultaneously recording it as a fixed expense. Of course, for your financial health, remember that the investment cannot compromise a significant part of your profit!

#03: Reinforce your entrepreneurial mindset

Finally, keeping this dynamic of control over your company’s financial movements requires a lot of discipline and commitment. The following essential mindsets can help you be prepared for any situation:

Make reviewing your records a habit

At the end of the month, take a moment to review the monthly results and make comparisons with previous months. From there, create a report that highlights the most important data, such as turnover, net profit, and expenses by category.

These details can be used to adjust prices, eliminate costs, or change strategies, whatever is necessary to keep your business on track to success!

Watch out for debts

Before making a financial commitment, make sure you know how you will pay for it and that you will receive a return on your investment. Therefore, avoid taking out loans or using credit cards, but if you must, choose those with lower interest rates.

If possible, have someone help you

This is only the tip of the iceberg for the entrepreneur, who has a slew of other responsibilities. That is why outsourcing some management tasks to a reliable BPO can help you keep cost-effective control over the problem while also providing professional insight into your performance.

Meanwhile, stay up to date on management activities. To acquire a better picture and insights into your company, consider taking basic finance courses and exchanging ideas with experienced entrepreneurs.

Master your finances and strengthen your business!

Given these tips, are you managing your finances assertively, or will you need to change your routine to incorporate new practices? Take charge of your financial management and make the necessary changes to transform your money into a valuable ally in your entrepreneurial career!

And for more useful suggestions, check out other exclusive articles from Blog Cetro! Each one is intended to take your business from theory to reality, covering everything from market trends to the best entrepreneurs' practices!