In order to keep your business running smoothly, it is important to develop healthy financial habits.
This means being conscious of how you spend your money and conserving cash wherever possible.
Let’s dive into how you can build habits and create a more sustainable business.
#1 – Set Financial Goals In order to conserve cash in your business, you need to get into the habit of regularly setting and updating financial goals.
You can do this by thinking about your current financial situation and what changes you would like to make.
Consider the following questions before setting a financial goal:
● What is my current profit margin?
● What is my desired profit margin?
● What are my current Overheads?
● How many hours per week do I spend on this business?
● What would be the best ways for me to save costs or increase revenue?
Once you have answered these questions, it will be easier for you to set realistic goals that conserve cash.
Remember, your goals should be SMART:
S – Specific, M – Measurable, A – Attainable, R – Relevant and T- Timely.
An example of a SMART goal would be:
Increase my profit margin from 17% to 27% within 7 months by streamlining operations and reducing costs.
The goal is:
● Specific because it includes how much you want your profit margin to increase.
● Measurable because you can track your progress over time.
● Attainable because it’s not impossible to achieve.
● Relevant because it will help improve your bottom line
● Timely because you have set a deadline for yourself.
When setting financial goals, make sure to keep the SMART acronym in mind.
#2 – Perform an Expense Audit (and Then Plug the Leaks)
In order to conserve cash, it is a good idea to perform an audit of where you spend your money.
You can do this by reviewing your bank statements or Cash book from the past Six months and identifying expenses that are not necessary for running your business or one-off expenses.
You can try to renegotiate contracts with suppliers or vendors and ask them for a lower rate on their services.
You should also make sure that your accounting software is up-to-date so you know where every dollar goes in your business (and what it’s paying for).
Finally, keep track of how much money comes in and out of your business on a monthly basis.
This will help you to stay on top of your finances and identify any areas where you need to tighten the belt.
#3 – Building Your Cash reserves
One way to conserve cash in your business is by building a Cash reserve.
This means setting up a system where a certain amount of money is automatically transferred from your checking account to your call account on a regular basis.
This can help you avoid the temptation to spend all of your money and will ensure that you have some funds saved up in case of an emergency.
There are a number of different online banking services that offer this feature, so be sure to do your research and find the best one for you.
When building your cash reserves, make sure to set up a transfer that is realistic for your budget.
You don’t want to put too much stress on yourself or your business by setting the transfer too high.
#4 – Monitor Your Cash Flow DAILY
Monitoring your cash flow on a daily basis is an important habit that can help conserve cash in your business.
The best way to do this is by setting up an automated system where you receive notifications every day at a certain time of the day when there are new transactions recorded in your accounting software.
Many companies have a day end report that summarizes all the bank transactions and bank balances daily in the form of a Banking Report.
This will keep track of all payments and receipts so that you can quickly see where money is coming from and going to.
Conserving cash is important for any CEO.
The small changes outlined above amount to a big difference to your finances over time, so don’t wait to implement them in your business.
Remember the old adage: in three months’ time, you’ll be glad you started today.
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