MANAGING BUSINESS FINANCES – TRAINING

Business finances are one among the many reasons as to why startups fail to make it through their birth year. Managing business finances especially after receiving say a big amount of money and getting some few team members on board so as to grow the company. It becomes usually hard to track your incomes and expenditures thus making it hard to negotiate the breeches to see where the gains and profits are.

That is why we bring you this information from colleagues who have seen and experienced what you are going through, and they managed to move past that hindrance in the growth of their businesses; so as they can share with you the most important things to know about business financial management. This whole information is brought to us from the webinar series named the same title as the above. The one, Yusuf Mulinya, was the panelist and the following is what he managed to put across. He was asked a number of questions and this is what he had to say;

What is business financial management?

The meaning of the question is derived from the question itself, business financial management is the way resources are managed on a business, and by resources I mean, incomes in terms of incomes and expenditures on different projects and operations in a business. Every business exists because of transactions and these transactions are what sustains its operations, therefore these transactions must be recorded. We as entrepreneurs must always ensure that our business transactions are recorded. This helps to manage your finances. How do you record your business finances? We record our business finances using the source documents.

What are the source documents? A source document is not something extra ordinary form what you know. It’s actually just another fancy word which means the documents used in recording finances, these include; the cash receipt book, the purchase book, the petty cash receipt book, checks among others.

Every transaction ought to be recorded if you are to become a good financial manager in your business. And some of the tools used in recording these include;

A cash book; this is a book that keeps track of all your cash flow and cash balance. Every entrepreneur must have a cash book, so as to record anything you bring in and spend out in terms of cash in your business. It’s also a good habit to balance your cash book every day. Much as many people prefer doing it weekly or monthly, I would suggest that if you can get time at the end of the day, balance your cash book then. Money is very delicate and you don’t want to mismanage your cash book just because you don’t remember some transactions that you made.

A petty cash book; usually is meant for the daily small monies that you spend on a daily basis. It’s also good to keep track of this monies because they may be small but at the end of the day after you have balanced your cash book you realize it’s a lot of money. This shall give you an insight of how you can limit expenditure and save where necessary.

Delivery note. This is a piece of document that clarifies that you have delivered the product to a particular client and that that client has received it. Many times it has the provision for the person who has received it.

STOCK CARD: if you have stock and your business deals majorly in stocks. That is your capital and you will want to manage it well. This you can clearly manage with a stock card where you record stock received and stock sold according and thus the returns as well.

Requisition form. This applies where your business or organization is in such a way that the person managing your accounts and the business finances is different from you, the owner of the business. for example, you have an accountant in your business/ organization.  Thus you will need to plan your expenditure as the business owner. It helps a lot in budgeting.

Cash payment voucher, a receipt book, a cash book, a cheque book for those who use cheques. Endeavor to always record every expenditure or income to its detail in a respective document. I re-emphasize this because of its importance in your business financial management.

These are the basic documents that one must have in a business. Usually after using all these documents and balancing the books well you will realize there is cash balance that is actually left behind.

How long will the cash left going to run?

Giving the situation in which the country and the global community is going through, the pandemic raging from one phase to another, we don’t really know how and when it’s going to end, one thing I have started working on is sustainability of my business. How much longer can the cash left take me on? the cash left in my account must be enough. In other words, have I saved enough cash in my account to get me through the coming months ahead. If not, then I mist work on improving my savings. There is a template document supposed to be shared to elaborate this.

Supposing I have 1M on my account and my total cost a month is 700,000/- the document will calculate and tell me on average I spend about 20,000/- a day for 30 days and thus notify me how much I need to keep running for the next month, depending on what I want. So If on average I spend 700,000/- a month, it means that in the next three months I shall be in losses. And my income wouldn’t be able to sustain me for the coming months.

So generate a worse case scenario document as shown in template. It will encourage you to start planning your expenditure and develop a saving culture. It’s always easier to get to this if you have an accounting software, like Quick book, ERP.

A software helps you add up things easily, as compared to using your manual books and excel. The advantages of an online software and using Microsoft excel, is that despite that fact that excel is understandable, and simple, it will always need you to add in some things manually. The online software has all these other steps handled.

Is it possible to access some of these tools? Yes, sure, these softwares are everywhere on the net. You simply have to know the right one to subscribe to. For me I prefer and supply ERP; a software that helps in the accounting and balancing your books at business. I like it because you simply have to feed it with the data and it arranges it for you. Its online and so you have to part with some cost.

When managing your business finances who issues a debt note and a credit note?

Anybody can issue either of the two, depending on the circumstances. In case you bought goods received them and realized they are bad and they are not the ones that you actually wanted so you decide to take them back. When you purchased these goods you were issued a purchase invoice, when you return the very goods back you issue a debt note.

However, in a scenario where you sold the product to the customer and the customer brought back the product you the product owner issues him a credit note. It’s usually used as a mitigating factor to reduce his expenditure.

How can someone develop a more consistent discipline of saving?

Well it’s so evident in a business that there are things that you just cannot cut off your expenditure list of priorities, however you ought to have a sense of strict financial discipline with your own personal finances.  For starter you can set goals and endeavor to achieve these goals as regards saving. Consider every penny you receive valuable. You must develop that attitude and mentality of saving each and every pent that you earn. Slowly by slowly before you know it you will be good at saving.

There is a software I can recommend to you for personal financial management that is BLUE COINS.  And for your business’s, you can use the VYAPER. At the end of the day, you can only manage your business finances, by monitoring your finances and evaluating your finances. You can always have it going when you have these tools like the cash book and the cash payment voucher. Together with all the other documents and tools as they were mentioned. We hope to take note and see your business grow in resilience and sustainability. Stay home and stay safe.