Managing Your “Money Wellness”

A 3-minute read

Ever feel overwhelmed when it comes to managing money, or the cash flow, for your company? Well, you’re not alone.

According to SCORE, a non-profit association dedicated to helping small businesses, nearly half (42%) of small business owners say that managing money (cash flow) is “challenging.”

If you think about it, every manager in the mechanical trades is expected to manage two very different businesses. There’s the technical one: the “on the tools” part; but there’s also the financial one that looks after the dollars and cents needed to keep everybody employed.

A well-managed cash flow will keep your business running smoothly.

To effectively manage your firm, it literally pays to investigate the “money wellness” of your company. Things like budgeting, setting goals, tracking income and expenses, and investing will help you make better decisions for the company, and your employees. Plus, by using money management tools in your business, you will end up handling things like bills more effectively which, at the end of the year, should help your company make money.

The Keys to Wellness

So, what can a contracting business like yours do to measure your money wellness? And how can you manage it on a regular basis? Here are some simple ideas to consider that cost time, but not money:

1 Create a “Money Barometer”
Consider creating a monthly “barometer” to help you manage your funds. This can be as simple as a revenue and expense statement including bank balances, or it could be a more detailed statement with forecasting and future cash needs.

Include anticipated monthly revenue, expenses and cash needs, so you can plan to comfortably pay all your bills each month.

You should also have an annual budget with monthly or quarterly benchmarks, to help you see where you are at during the year. Budgets help determine the expense and revenue targets that are needed to run your business.

2 COLLECT the Money You are Owed!
Try using a clearly defined process for collecting any monies that are owed, and bring your staff into the process so they are familiar with collection techniques.

A monthly summary of outstanding receivables can help track customers who owe money, the amount each owes, any past-due dates for payments, as well as the total of all outstanding amounts.

Another idea is to offer incentives to customers so that they pay more quickly, such as discounts or charging interest and penalties for past-due payments.

3 Pay Your Bills on Time
Late fees are costly! When it comes to business bills, consider an approach of “pay them on time, every time.” Paying late fees will add up over time, sour relationships with lenders and affect your credit rating.

To have cash on hand to pay your bills, you need to know when bills are due. Set up monthly reminders, or have a monthly summary of due dates. List how much is owed, to whom, and whether you are current or past-due on any bills.

4 Make Being Frugal a Habit
How you spend your business’s money affects its money wellness, and a frugal approach to expenses for you and your employees can definitely help.

You have probably heard (maybe too often) the tip, “Reduce expenses and increase income.” That’s easily said, and much harder to accomplish, but some things that help cut costs are fairly straightforward. Think about getting quotes before purchasing regular business materials, or bringing in part-time help before committing to additional full-time staff.

Another tip is to know exactly what your business spends monthly. This will not only help you control expenses, but will also identify ways to eliminate unnecessary costs. Timing purchases for when you have cash on hand can also help with your company’s money wellness.

5 Have a Cash Reserve
So, you understand and monitor the money wellness of your business, but then something unexpected happens. What do you do? You turn to your cash reserve.

A cash reserve helps you manage your money when emergencies or other unforeseen things occur. These are typically setup as business savings accounts and are based on a target amount that reflects a realistic assessment of any emergencies that may arise. Target setting is not a precise science, so the amount can change as the business grows.

More Tips and Advice
Want to know more about managing your “money wellness”? Have a look at these sites: