Tuesday, November 17, 2015

Money Management in Small Business

Running out of funds is a nightmare for any business. It is impossible to operate a business successfully without having good money management skills. Following are few tips to help you in this regard:

Make a budget: you should know your periodic expected income as well as expenses. Also you should be aware of break even point of your business. Then plan & work hard to cross it and go beyond it.

Start with adequate funds: When you start a new business make sure that you have sufficient funds at your disposal. Usually new businesses take some time before they can support themselves. For the first few months you should have enough reserves to meet all the expenses.

Check cash in hand & bank position regularly: Monitor incoming & outgoing funds on daily basis. That's how you will always know your current fund position.

Check your receivables & payables frequently: Just like fund position you need to see your receivables & payables on daily basis. Take necessary action to ensure that you receive your payments and meet your liabilities on time.

Invest in good accounting software: This will give you more control over, all the financial issues. Also you will always have a complete picture within a mouse click. It will give you quick & accurate information. It will save you a lot of man hours. Also, it will help you to make quick & right business decisions.

Reduce expenses: Reduce your expense by purchasing items only when needed. Buying unnecessary things will block your funds. Always negotiate rates with suppliers. Thoroughly examine everything in your business and try to reduce expense where possible. Make sure that nothing is being wasted in your business operations.

Try to receive your sales proceeds on time: Make a clear payment policy and inform your customers accordingly. Offer discount when a customer pays upfront. Do not offer long term credit to your customers.

Never mix personal funds with business funds: Please make sure that you never ever do that. It will only complicate things and you will never be able to find out the correct financial position of your business.

I hope you found the above helpful. Please feel free to comment.

Sunday, November 8, 2015

Purchasing System for a Small Business

Every organization needs goods & services to run its business.  Arranging those goods &  services from external sources is called purchasing. A purchase department buys raw material, spare parts, services etc. Sometimes these are available in local market and sometimes these  need to be imported or manufactured from a workshop.

Depending upon the nature of business purchase manager needs some expertise/technical knowledge to discharge his/her duties well. Purchasing is one of those vital functions which can make or break an organization. It has to be done with great responsibility. The objective of a purchase department is to buy required items at minimum price. Also, it should avoid a stock out situation at all cost.

 Following are few tips for small businesses to perform this function right:

·         First understand what  exactly you need to buy i.e. specifications/detail of the required product/service. This way you will protect yourself from ordering substandard or wrong stuff.

·        Get three or more quotations from different suppliers.

·         Make a comparative statement to select the right supplier.

·         Always negotiate price.

·         Try to get some credit.

·         Always try to find out why one supplier is economical than other.

·         Place order to a supplier with good repute.

·         Place order on time. Delaying may hamper some business operations.

·         When placing order mention complete specifications on the purchase order.

·         Maintain a minimum stock to avoid disruption in business operations. Items which are not readily available their stock should be more than the ones available on short notice.

·         Maintain good relationship with your suppliers.

·         When selecting a supplier keep all his/her term & conditions in mind.

·         Determine the exact quantity to be ordered. Buying too much will block your funds and ordering too little may create a stock out situation.

·         Upon receiving the goods, thoroughly inspect the items to ensure these are as per your purchase order.

·         Pay the supplier only when you are satisfied with the quality.

I hope you found the above helpful. Please feel free to comment.