Finance is not only for the big corporations, not only about your personal investment portfolio. Its a crucial side of every business, micro, small or even the big ones.
It doesn't take a genius to figure out, but it takes a steady work to never miss financial side of business. And no fancy tools are needed, whatever they try to sell you.
There are 4 interconnected parts:
- Planning
- Capital management
- Risk management
- Financial analysis
You plan your next years. It consists of forecasts and planned changes to the business - new hires, new point of sale, cheaper supplies, investments. Anything you plan to do.
In your plan, you have to consider risk management. What if your key worker gets sick? What if someone leaves your company? What if you lose a big client or they just don't pay in time? You have to prepare for that.
Perhaps you can get a pre-approved loan for downturns. Or use your own savings. Maybe you can retain more earnings at the end of the year. Either way, your capital structure matters for saving your company.
And lastly, you have to analyse future. If you branch out, switch revenue model, move to different locations, they all have implications. And those impact your finances.
4 simple parts. 4 steps to be prepared for future.