The biggest challenge for small and medium businesses is financial management. Many small business owners often complain of how they can’t explain financial loss despite their shrewd financial management. Sadly, thousands of small businesses within the country don’t survive their third year due to poor financial management.
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Managing your finance like a professional is very key for business growth and a stable financial future. In this article, we shall highlight five key financial tips for small and medium enterprise (SME) owners.
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Pay Yourself
As a small or medium business owner, it’s easy for you to neglect yourself while starting and may even undermine your role despite being in charge. You might want to be sacrificial to exempt yourself and attend to other needs of running the day-to-day operations of the business. The consequence of not paying yourself is that most often and on, you might dip hands into your business budget or profit to settle your personal needs. Furthermore, when you don’t pay yourself at the end of the month like other employees, you might collapse business expenses and personal expenses into one spending, which can hurt the business. Therefore pay yourself like a usual employee and it will make you know that you are only entitled to your salary and not business funds.
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Invest In Growth
Aside from paying yourself, you should also set aside money for investing in business growth. When there is a business growth fund, your business is always opportunity ready. Hence, keep your eye on the future to thrive, especially to expand, innovate, and employ talents. Successful SME’s often save for investments. For example, you can invest business funds in bigger companies, real estate, agriculture, where ROI are certain, rather than saving business money in the bank where the interest rate is optimally low.
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Don’t Be Afraid Of Loans
According to contrary opinions, SME’s should not be afraid of loans, especially in the Nigerian landscape. In Nigeria today, there are several business-friendly loans occasionally granted by the federal government of Nigeria. There are countless opportunities to receive government aids. Furthermore, aside from public handouts given to these other private grants-giving organisations. It’s up to you as an SME to seek out these opportunities in business journals, the internet and the newspapers.
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Have A Good Billing Policy
Managing finance effectively has to do with knowing when to get your invoices and payments and keeping them on record so that your paperwork will be neat and well explained, and as well as easy cash flow, to control and regulate expenses. As a small business owner have a deadline when your clients get to pay you so that you will have a consistent cash flow for expenditures and income. If you have clients that consistently delay their payments, you will have to get creative on how to bill them. For example, you can give a ten days ultimatum and a 2% discount if they pay within the stipulated period.
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Branch Out Tax Payments
Paying tax as an SME is a civic responsibility, but it is often one of the dreaded moments of every small business owner. It’s often pointed out that payment of tax quarterly is often tedious and looks massive. However, the best way to tax as a small and medium business owner is to spread the payment of your tax every month so that payments can be captured in your bookkeeping as expenses.
Featured Image Source: Value Research
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