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.