How To Manage The Finances Behind A Business [Ultimate Guide]

The managing of the finances behind a business is a skill that involves lots of different factors, variables, and knowledge that plays a role in the way the business is run, managed, and operated.

Each business or company travels along its own path, but there are ways a business can grow to maintain its ability to operate and to keep its focus on the long-term vision of where it wants to be.

While it’s something that takes a bit of time to learn, managing the finances behind a business correctly, can position a company to continue operating during any difficult times, maintain the growth or momentum it was able to build or accumulate, and ignite the business to continue moving forward.

There are lots of ideas and concepts to consider when it comes to managing the finances behind a business, let’s dive into a few…

#1. First Understanding Where You Are

Before you can truly move forward, or begin going forward with the managing of the finances behind a business, it’s often been said, by many others and not me (no credit being taken), that you have to first figure out or learn where you are before you can go anywhere.

When it comes to the managing of the finances behind a business, it’s often the same. A lot of what we mean is the type of financial standing you’re in, the type of financial resources you have, and the type of income or cash flow the business is generating.

Once you’re able to get a feel for the type of resources you have available or the situation you’re in, you can begin to move forward and make some decisions.

Without an understanding of where you are, or what you have, it’s possible that you make some costly mistakes, that may hurt the business down the line, or affect the way it’s able to run or operate.

Once you have a sense of the number of assets the business possesses and generates, you can figure out the type of investments you can afford to make, which can be worthwhile and helpful, and which can be eliminated.

You can have an idea of the way the business has to be run, whether it needs to keep a close eye on its finances, can afford to make a few investments or expenditures, and the health the business is in.

#2. Building A Strong Financial Foundation

The financial aspect behind any business is an important element to its operations, and its well-being. Without having the necessary financial capacity or wherewithal, businesses have a tough time operating, and having the funds they need to grow, develop, and expand.

There are lots of ways to build a strong financial foundation for a business, some can be seen by placing a heavy emphasis on having ample amounts of capital on hand, a low monthly expense or operating cost burden, and a manageable pace of growth or expansion.

Having a strong financial foundation can be beneficial to a company or business in a variety of ways, it can provide them with the flexibility to try new marketing channels, explore new products or services, and continue to create.

It can provide them with the ability to manage or weather the storm of any unforeseen circumstances or difficulties that may arise or burden the business.

It can help the business have the ability to capitalize on any new opportunities or developments that may arise. It can help place the company in a strong position among its competitors or within the market, helping to continue its operations and continue growing or expanding the underlying business.

There are lots of ways a strong financial foundation can be beneficial to a business, and it’s something that can help protect the future of the business as well.

#3. Growing Slowly and The Rate of Growth

Within business, one of the tasks that many companies look to do is to grow and expand the business they’re operating. Whether it’s through entering into a new market, expanding the products or services they offer or scaling the number of employees, factory’s, or equipment it possesses, a lot of businesses are looking to grow or expand in many different ways.

And while growth and expansion are a great thing, and something that can be very beneficial and important for a business, it’s also important to maintain the right perspective, the right pace of growth, and understand what your business can and cannot afford.

Growing is a great thing, and something that each business should do, but each business has a different amount of financial resources or assets it has, and each business has a different amount of expenses or costs it needs to continue operating.

While growth is an important aspect of every business and something lots of businesses focus on and prioritize, it’s also very important to focus on the business’s operations, and the managing of the business as well.

It’s tough to sometimes not get caught up in the momentum you’ve been able to build or accumulate through growing, but if you’re growing at the expense of the business’s operations, or at an unsustainable pace, it’s a risky endeavour.

It’s risky to put the future operations of your business in the hands of growth which are unknown and may prove to produce less than expected results.

That’s why it’s important to grow slowly and keep a close eye on the pace of growth or expansion you’re embarking upon. It’s a great thing to have a growing business, and one that is quickly expanding, but when it cuts into the funds the business needs to operate or affect the businesses livelihood or health going forward, it may be too costly of an expenditure to pay.

There’s a reason why many experienced people and professionals often say, “Slow and steady wins the race.” It may not be sexy, or the cool thing to do, but it is often the most productive and worthwhile path to follow.

Growing your business slowly and steadily, while keeping a close eye on the rate of growth you’re experiencing, whether you can sustain it, and your ability to continue managing or operating the business is something that’s very important when you’re trying to manage the finances behind a business.

#4. Moving In Steps or Phases

Something that we’ve learned along the journey of managing the finances behind a business, is moving in steps or phases. What we mean by that is, there is often a time or place, where you have the opportunity to grow or expand, and might wait or decide to do it sometime in the future.

Whether you don’t feel you’re ready, you want to move slowly or steadily, or you want to accumulate more assets before you decide to grow, moving in steps or phases can help ease the growing pains you may experience, and give you extra time to decide what to do.

When you move in steps or phases, you often have certain criteria or standards you’ve set before you decide to grow or expand which can help you create a framework or baseline to when you should move.

The metrics or checkpoints that you create, can help give you the extra time you may need to continue building your foundation or act as a performance barometer for you as well.

By moving in phases, you can continue to run and operate your business, without taking on additional tasks or costs you may not feel comfortable with or may create an unneeded or unnecessary burden until you’ve achieved the checkpoints or metrics you’ve set out to help guide you during your growth.

#5. Continuing The Flow of Income

Each business generates its capital or its income in a variety of different ways. Something that is important to do, and to continue doing, is generating income or revenue for the business to continue operating.

Whenever a business is unable to generate income or revenue, it then has to figure out how it’s going to pay its expenses and its costs. Keeping the business going, continuing to generate or produce sales, and having a stream of incoming cash flow is something that’s important for keeping the business going.

Without a flow of income, a business has to make tough decisions on the costs it’s bearing, and whether it can afford to keep certain luxuries. The flow of income a business has, often supports its monthly expenses, any employees or payroll costs, and the continued operation or management of the business as well.

Without one, a business may not be able to innovate or create, experiment with new ideas or marketing channels, or grow and expand in the way it needs to.

While it may seem obvious, keeping a steady flow of income, is important to keep a business’s finances afloat, and maintain the financial wherewithal the business currently possesses.

#6. Operating At A Net Positive

The way a business is able to generate a profit, or make money, is by operating at a net positive. Operating at a net positive means the business is able to make or generate more than it spends. For a business to do so, it needs to keep its expenses lower or less than the amount of revenue or sales it’s able to generate.

Finding ways to generate revenue or sales while keeping costs in check, is something that each business has to figure out, and find a way to keep its expenses lower than its income.

It might mean limiting the amount of money you spend to acquire a customer. It might mean cutting back on the expensive or costly elements to a product or service you offer.

Or it might mean eliminating any unproductive or non-essential costs. There are lots of factors that play a role in whether a business is able to be net-positive or produce a profit, but the two main drivers are the amount of revenue it’s able to generate, and the costs associated with the businesses operations, or ability to drive those sales.

Sales come in different ways, from different places, and with different costs. Early on, it may be difficult for a business to operate at a net positive, but it’s something that’s critical to the business’s livelihood and its ability to stay around.

Without operating at a net positive, businesses are unable to generate any income, or profit, making it tougher to continue operating or running.

Whether it’s the founder or owner who’s looking to the business as a way to produce the income or money it needs to live or the employees who need the jobs to continue paying for their lifestyles, it’s very important for a business to be able to net-positive, that way the business can have the funds it needs to continue paying the expenses or costs it has and to prepare for any unforeseen or unexpected events that may negatively affect a business in the future.

#7. Keeping An Operating Reserve

One of the elements to business is the unknown or the unforeseen circumstances you might experience or endure. It’s difficult to predict everything that will happen, and the way your business may be affected, but by keeping an operating reserve on hand, you’re able to limit the severity any unforeseen or unexpected circumstances the affect they have on your business.

Certain unforeseen events or expenditures your unable to prepare for or plan for, and are out of your control, but you can at least try and prepare for whatever may come your way.

Keeping an operating reserve on hand, can help you whether any of the slow months you may have if your business has any seasonality or trends to it. You can reduce the amount of dependence you have on your monthly income or revenue to meet your bills or expenses.

And you can help prepare or plan for your business to continue operating and continue running for whatever may arise. While it may seem difficult and hurt sometimes to put money to the side for an operating reserve, it can prove to be a valuable asset to have, and something that can keep your business going during any difficult times, or rough times that may arise.

#8. Focusing On The Long Term

Managing a business’s finances is something that’s a bit of a forward-looking task, that can help or hurt a business’s long-term prospects.

In the beginning stages of a business, it may be difficult and a bit of a struggle to manage the finances, and figure out different ways to make ends meet, but by focusing on the long-term and continuing to build or grow your business, you can continue to move forward, and work to get to where you want to go.

If you’re moving in a good direction, and progressing forward, keeping a focus on the long term, and the path you’re on can be helpful in making any business decisions.

You can put each investment or cost in the right perspective, and decide if it’s something that’s worth the cost, or something that isn’t.

While the short-term may come with some hardship or difficulties, hopefully by keeping the long-term in mind, the decisions you make will pay off down the line.

Conclusion

All in all, there are lots of ways and strategies that can be helpful or beneficial when it comes to managing the finances behind a business, these were a few that we saw to be true, and believed could possibly help anyone trying to manage the finances behind a business.