Tips to Improve Your Personal and Business Financial Management
How is your money situation? Whether in business or personal life, the way you handle your finances greatly impacts your economic well-being. Good financial management is essential to properly utilise your available funds for spending while saving money and growing your wealth. It also builds your creditworthiness, which is vital when you apply for a business loan or any other types of financing.
Follow these tips to get better at managing money.
Personal Financial Management Tips
Financial management skill is not taught in schools. It is mainly learned from parents, peers and experience. If you learned how to smartly handle money early in life, you’re likely enjoying financial stability and prosperity as an adult. If not, it’s never too late to learn and reap the benefits of making good financial decisions.
1. Get into the habit of saving money.
The most effective way to cultivate the habit of saving money is to save something every day, no matter how little amount of money it is. Doing the behaviour repeatedly is crucial to forming a saving habit.
You can start saving for your emergency fund or a specific goal, like buying a pair of shoes or going on an out-of-town trip. Achieving specific financial goals is another important component in forming the habit of saving money.
2. Spend less than your income.
Controlling your urge to shop and spend can be difficult, especially if you’re just getting started. Fortunately, there are strategies that can help you do this. It includes:
- Shopping strategically, like aligning your shopping days with the upcoming sales in your favourite malls or stores
- Taking good care of the items you already own and buying products that are of good quality even if they’re not the budget-friendly versions
- Conveniently tracking your expenses through apps and other digital resources
- Reviewing your credit card and bank statements regularly and promptly getting any issues and fraudulent charges reported and resolved
3. Create a budget plan.
A budget plan helps you organize your finances and creates better spending habits. By knowing where your money goes and how much money you’re spending on products and services, you’re more likely to allocate more money to your needs and stay away from overspending on certain expenditures.
There are plenty of downloadable budget plans out there that you can personalise with your own goals. Choose one that emulates you with your own goals.
4. Automate your finances.
If you’re struggling to control your urge to spend and save more money despite having a budget plan, automating your finances can help.
Step 1: Create a checking account that sets a predetermined schedule where your cash comes in and out.
Step 2: Request your paycheck to be deposited directly to your checking account on payday. Immediately direct a portion of your salary towards your emergency fund and retirement savings.
Step 3: Set up automatic payments for your necessary expenses, like utility bills, mortgage and internet subscriptions. If you’re renting a house or apartment, ask your landlord if you can set up automatic electronic payments for your monthly rent.
Step 4: If you have investments, make automatic deposits into your investment accounts at predetermined times and mix of funds.
Step 5: Increase your savings over time by setting up an automatic escalation. Many banks let you increase your recurring contributions on a yearly basis. If this is not an option, identify an annual date to increase your savings.
5. Reconcile your bank and credit card statements regularly.
Checking and verifying records in your bank and credit card statements helps ensure that all your financial transactions are accurate. This habit will help verify your cash flow and detect and immediately resolve discrepancies that might be caused by bank errors and fraud. It also promotes conscious spending, which helps you save money.
6. Grow your money.
Allocate a portion of your income to investment opportunities.
- Acorns. If you don’t know where to begin, use Acorns. The app rounds up your credit and debit card purchases and invests the difference to the six different Exchange Traded Funds (ETFs).
- Roboadvisor. You can also let a roboadvisor invest your money for you. This software uses algorithms to automatically allocate, manage and optimize your money. It also has an automated intelligence that tracks your investments.
- Mutual Fund. Low-investment mutual funds are other options. These investment securities put your money in a portfolio of stocks and bonds with a single transaction.
- Superannuation. If your employer offers superannuation or other employer retirement plan, do not hesitate to join. Even if you’re on a tight budget, you can still contribute a small amount that you would hardly notice on your pay stub. You can also claim a deduction for your after-tax personal superannuation contributions.
Financial Management Tips for Your Business
Financial management in the business world involves the planning, organizing, and monitoring of your financial resources to achieve your business goals and objectives.
Handling the financial aspect of your business is not easy, but with good financial management skills, you can efficiently direct and control your resources and maximise returns while minimising losses.
1. Make an actionable business plan.
Develop an actionable business plan that dictates your financial goals and guide your decisions. Track it on monthly, quarterly, and yearly to ensure that you are on the right track.
Your business plan helps you properly allocate budgets for each area of your business. This will identify areas where you need more funds and areas where you can reduce expenses to avoid overspending. By having a plan, your business decisions are guided and underpinned, giving you more financial security.
2. Use cloud-based accounting software to manage your business finances.
If you are not a trained accountant or do not have one in your organization, managing your business finances can be extremely overwhelming because it requires looking at a lot of data that need to be processed on a daily basis
Aside from giving you the power to access your financial data anytime if you have internet, a cloud-based accounting software automates many of your business’s accounting tasks, including tracking expenses and sales numbers. With this accurate real-time information, you can understand your current financial situation better and take the necessary steps to secure it.
3. Keep track of your day-to-day expenses and fund allocation.
Use cloud-based accounting systems and employee management software to keep track of your expenses and how your money is being allocated. This will give you a clear understanding and full control of your budget allocation, especially to your most common expenses. You can also avoid spending too much on your overhead costs and running out of funds for the fixed costs of your business, like utility bills, employee wages and taxes.
4. Stay on top of your business invoices.
Late payments and non-payments can completely drain your financial resources. Use a cloud-based accounting system to efficiently manage and keep track of your invoices, especially if you are a B2B retailer. You’ll be able to send out accurate invoices in a timely manner and ensure that you get paid by customers on time.
To ensure that invoices are paid, make payment terms and conditions, especially payment deadlines, clear from the outset. If an invoice goes unpaid, you’ll have legal resources to collect any debts owed to you.
5. Use an inventory management system.
An inventory management system automatically helps you monitor your items in stock. This is especially beneficial if you ship physical products. If your inventory management system is cloud-based, it also provides up-to-date data on sales trends.
Through this technology, you will have full control of your inventory levels while effectively forecasting the upcoming seasonal demands. As a result, you’ll be more prepared to keep your most popular items in stock and avoid wasting money by ordering plenty of items that are not on demand.
Managing your personal and business finances efficiently keeps you away from getting stuck in debt and business failures. Cultivate good financial management skills and do not hesitate to exploit the power of technology and automation to successfully navigate the world of finances.
Positive Lending Solutions is an online lender that offers convenient financing options for businesses and private individuals across Australia. Use our online forms to request a Quick Quote, Free Credit Check or Loan Pre-Approval.
See also:
How Bank Statements Affect Your Loan Qualification
Tom Caesar is the Managing Director of The Positive Group, a group of Australian financial services companies offering a broad range of finance to clients Australia wide. The Positive Group assist clients in the areas of car finance, mortgages, insurance & wealth management. Tom has been in car & asset finance for over 10 years. Tom regularly contributes articles on car finance, insurance, technology and business growth, drawing on his experience of starting his own brokerage in 2009.