9 THINGS EVERY BUSINESS PERSON NEEDS TO UNDERSTAND ABOUT FINANCES

 

  1. You need to understand your cash flow really well.

Theres always a difference of the amount of cash available at the beginning of a period (opening balance) and the amount at the end of that period (closing balance).You need to be fully aware what could increase your Cash flow.Is it selling more goods or services,  selling an asset,  reducing costs,  increasing the selling price or its taking a loan.Different businesses need different solutions you need to find what works for you.

 

  1. Do you have enough capital that could be used in the day-to-day trading operations for a long period of time?

This will cushion you just incase payments from your clients come in way later than expected.In addition to this for a new business to start making profits it will take time so you need to have enough capital to sustain you during this periods.

 

  1. There are times a ‘trade off’ will come in really handy.

A trade-off  is a situation that involves losing something in return of  gaining another.For instance there are times you may need to pay your supplier more for them to provide you with supplies for 90 days instead of 60 days probably because your clients have not paid you this month and business has to go on.

 

  1. Can your pricing meet fixed costs?

There are always this expenses that have to be paid by a company constantly regardless of the goods produced or profits made.It could be rent, salaries or even transportation.Your pricing has to capture them irregardless of any economic effects.

 

  1. Be as lean as possible.Don’t run to employ too many people at the beginning or when your business is still young.If you have a number of different skill sets that your business needs, work with that for awhile.

 

  1. You need to be aware of the difference between a product’s selling price and its cost of production.This will highly contribute to how you price your product.

 

  1. Most businesses want to work with Big clients from chains of stores or any organisation known for huge turnovers.The advantage is getting a big cheque from one client viser ve the same amount coming from five small companies.But how are you planning to handle payments that take too long yet you need the money to improve your business?Bigger organisations take more time to pay than smaller ones.So you need to know how you’ll cushion your business from late payments.

 

  1. You can increase you sales by pitching to potential customers constantly. Talk to them about the potential in your product or how your services can improve their lives.

 

9 .You don’t have to work on credit you can ask for a deposit instead.

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