Learn how to read your financial statements, first.
If you don’t do your own bookkeeping or simply rush it because it’s an afterthought, you need to figure out how to listen to what your numbers tell you. You should know what your balance sheets, cash flow statements and profit and loss statements show you – they should all show that you’re making more than you’re spending. If you are in debt, you likely have two kinds of debts to deal with.
You need to reduce debt, the smart way.
What are these types of debts? They’re short-term debts and long-term debts. Short-term debt might be what you owe on 30-day accounts, to-be-fulfilled orders or commercial credit card debt. Long-term debt might be useful debt, such as car loans, equipment loans, real estate loans and other types of mortgages such as a chattel mortgage. These could also be leases and hire purchases. You should always use short-term income gained from sales of inventory or cash to pay short-term debts first. Long-term loans (such as $100,000 business loans) and share capital (funds from yourself or partners) can be used buy inventory that you can then sell for cash – or just to have cash in hand. You should never use short-term loans and liabilities to finance long-term assets, because lenders will ask for money sooner, rather than later. If you have several different loans owing, it makes sense to talk to a financial professional and consolidate your debts.
This is part of reducing your expenses.
Many businesses spend too much on utilities, communications and even travel. Using your statement, you can identify what items or services you’re spending too much on and look around for cheaper alternatives. You could save money on travel by conducting business over GoToMeeting or Skype, for example.
Get your books in order and get them online.
Now, there’s no excuse for having your books out of order. One of the more popular web accounting apps Xero is handy for not only for budgeting and for looking at your profits and debts, but for invoicing and keeping track of cheques and spending. You can also find other programs such as QuickBooks or MYOB that are useful for getting your commercial finances in order. Then you’re well on your way to earning more and spending less!