There are a lot of fantastic business ideas that end up failing during the early years. Why? A lack of financial management.
Managing your business finances is the foundation of your sustainability and longevity. Creating healthy financial habits and processes starts during the early days of an organization. If you’re striving to set your business up for success, use these helpful tips for how to manage your small business finances.
Create a Profit First System
Many entrepreneurs and small business owners struggle with the balance between personal and business finances. In some situations, it’s a matter of separating the two. In others, it’s a matter of drawing from the business to pay oneself a salary. Failure to create that separation can lead to audits and heavy fines or entrepreneur burnout.
Using a profit first system flips the traditional business structure of “revenue minus expense equals profit” on its head. Instead, you take out your profit and make your expenses fit your revenue. By shifting this mindset, you create a healthy attitude regarding business finance that encourages growth.
Monitor Your Credit Score
A lot of small businesses don’t collect any information about their credit score until it’s too late. Finding out that your credit score is terrible when you go to apply for credit can devastating for a small business.
Schedule time quarterly to take a look at your business credit score. If necessary, work with a credit repair business to dispute negative items and start the healing process.
Don’t worry about how looking at your credit score will impact the number. There’s a difference between hard and soft pulls when it comes to credit scores. Looking at the number once every few months is vastly different than having a loan agency pull it to assess your borrowing eligibility.
Reinvest in Growth
They say you have to spend money to make money. When it comes to managing your business finances, that’s the truth. While it’s important to track and curb expenses, it’s equally important to reinvest in growth.
For example, dedicating 10% of your income to marketing efforts will create a scaleable strategy for your business. As you attract new customers with that investment, the 10% will grow with the revenue.
Don’t just consider how much something costs when looking at business expenses— always work with the ROI in mind.
Be Tax-Ready All Year
Preparing for tax season should be a monthly task. Updating your expenses and filing your paperwork each month will ensure that you’re setting aside enough money to cover the tax bill. Furthermore, it will prevent last-minute panicking that could lead to missing out on claims that could maximize your return.
Organization and time management practices will help you manage your small business finances by being tax-ready all year.
Invest in Insurance
As a business, having insurance is one of the best protective measures you can take to protect your business finances. Find out which types of insurance you should have based on your industry. You want to be covered based on dealing with your clients, managing employees, having a physical location, covering inventory in the case of a natural disaster, etc.
Insurance is one of those expenses that you scoff at until you need it. Don’t let the up-front cost prevent you from making a smart financial decision for your company.
Negotiate Like a Pro
Learn how to negotiate with vendors, suppliers, contractors, and customers. While it’s essential that you are good for your word and deliver on what’s promised, there’s always room to negotiate.
Work with your contacts to find an agreement that benefits both of you. Negotiating is a great way to cut back your business expenses with minimal effort. Remember to maintain professionalism and be realistic when negotiating as to maintain positive vendor and customer relationships.
Build Your Savings
As a small business, you should always be working to set aside some money. This means planning ahead for recurring expenses so that you aren’t dipping into credit when those bills come up. For example, your annual property taxes or business tool subscriptions. Setting aside $15 a month to pay for your annual social media scheduling tool is a lot less impactful than taking $180 from a single month of income.
It’s also worthwhile to build an emergency savings fund in the event that something goes wrong in your business. Ideally, you’ll have enough in this account to cover your business expenses for a month. Small business owners should practice this both with their business and personal finances.
If you’re ever at a loss for how to manage your small business finances, don’t hesitate to reach out to a financial advisor. Find someone who specializes in working with entrepreneurs. Remember, the decisions you make today affect your success tomorrow.
6 STEPS FOR BUSINESSES TO ENSURE THAT THEY ARE DATA COMPLIANT
By Alex Hazell, Acxiom UK head of legal
Data compliance can be a complex – and ever changing – consideration for marketers in all sectors.
And today, where a data-driven, personalised approach is the answer to create outstanding customer experiences that beat those of competitors – as well as a crucial governance consideration – it has never been more critical to understand data compliance, and get it right. This is particularly true in financial services, where neobanks and fintechs are using data-driven approaches to gain more and more ground in the sector.
GDPR, CCPA – understanding the acronyms and regulations that apply
With the volume of consumer data of all kinds growing exponentially, understanding how to use it effectively is critical to business performance; and a growing number of governance rules is in force to ensure legal, ethical and responsible use of personal data.
Ultimately these regulations are in place to compel organisations to review and improve how they collect, store and utilise personal data, and to place greater emphasis on ethical practice and individual rights.
For example, in the UK and the EU, the General Data Protection Regulation (GDPR) came into force in 2018 to accompany the e-Privacy Directive that sits alongside it, and is focused on protecting individuals from the unlawful and unfair use of their personal data. Note that the EU is in the process of replacing the current e-privacy Directive with the e-Privacy Regulation.
Equally, the California Consumer Privacy Act (CCPA) came into force as of January 2020 and is a state statute designed to enhance privacy rights and consumer protection for residents of California, USA.
Of course there are many other regulations to consider. For example, when in heavily regulated industries such as finance, firms may have a requirement to comply with other sector-specific regulations and codes such as FCRA, HIPAA, PCI – as well as CCPA or GDPR. Or, they may need to know how to manage sensitive or special category personal data which often requires a higher level of compliance.
And because of the breadth and complexity of these ever-evolving considerations – including, but not limited to eye-watering maximum level fines for non-compliance – data compliance can seem overwhelming. So, how can marketers truly understand what’s required, and stay on top of the rich tapestry of governance and regulations that applies to their organisation?
Six steps to ensure compliant customer data use
At a top level, data compliance requires marketers to take a transparent, considered approach to consumer data, based for the most part on providing varying degrees of notice and choice; for example, in the case of the GDPR, that may be via the consent or legitimate interest grounds.
With this in mind, and a focus on driving relevancy, value and impressive experiences, aimed to surprise and delight, both marketers and consumers can benefit from data compliance – it’s the ticket to better data driven experiences on all sides!
So how should data-driven marketers act to be certain of best practice data use, post GDPR and CCPA?
- Always put the consumer first. Consumer interests and customer value must always shape how marketers collect, use and protect data, to ensure trust, transparency and compliance.
- Work to communicate value. Keep data use balanced across the business, not just in marketing. Always orient toward driving consumer value – to demonstrate and explain the value return that consumers will achieve from a data exchange.
- Build trust through transparency. Clear, simple explanations are important to ensure understanding and build trust. So be open and transparent – data used for marketing is a far cry from personal data being used for other more intrusive purposes – and those doing the right thing have nothing to hide.
- Ensure responsible, balanced use of data. Organisations need to make sure it has clear internal policies around data ethics, privacy and work to ensure balanced data use everywhere, for true trust. Note that in the case of GDPR, firms need to be able to demonstrate accountability, and data protection impact assessments are often required to ensure the correct safeguards and balances are in place.
- Remove data silos. A fragmented tech stack with disparate data makes it hard to truly see what data a company has, where it is, and how compliant it is. Creating a unified data layer and removing silos is the best way to connect the data, ensure data accuracy and hygiene – and unlock seamless customer experiences through greater personalisation. This data combination also needs to be done in a compliant and ethical way.
- Prioritise data protection and compliance. Adhering to data privacy legislation is a ‘must-have’ consideration, not a ‘nice-to-have’. As such, it’s critical that marketers put in place a set of accountability measures to ensure responsible and compliant handling, whether they choose to do this alone, or with the guidance of a trusted data partner.
A compliant approach to consumer data and privacy is a critical part of any business strategy – not an optional one – so it’s important to have a roadmap to compliance for the business.
Of course, knowing how to assess, consider, and (where needed) adjust how an organisation hosts, manages and uses data to remain compliant can be a challenge. For this reason, many organisations choose to seek external expertise and advice, and understand the assistance and competitive advantage that a data partnership can provide.
Ultimately, from providing clarity over governance and legislation, to ensuring data processes and technologies are compliant, secure and futureproofed – working with a data partner can help organisations understand and navigate regulations to execute ethical, legal and responsible compliance for seamless, trusted marketing.
FIVE REASONS WHY YOUR BUSINESS’ PROCUREMENT TEAM SHOULD BE USING A CONTRACT MANAGEMENT SYSTEM
By Daniel Ball, business development director at Wax Digital
Even in today’s digital-first environment some businesses are still storing documents, such as contracts, in filing cabinets making it labour intensive to retrieve, manage and even identify important paperwork. In fact, it is calculated that poor contract management practices are costing companies an average of nine percent of their annual revenues.
Moving to a contract management system online can speed up the retrieval process and help decrease the amount of time and resources required to manage contracts. Using a CMS companies can create an online database to centralise information and store documents. Not only does this help ensure contracts are well managed and kept up-to-date, but it can also help businesses save up to 20 percent of overall costs per year.
From legal departments overseeing regulation compliance to finance teams ensuring payment deadlines are met, contract management technology benefits many areas of an organisation. So, how can a good CMS help your procurement team?
How will a good CMS help your procurement team?
The number of suppliers your procurement team must oversee varies depending on the size of your business. It’s not uncommon for large enterprises to be working with thousands of suppliers at one time. A CMS will use automation to record, manage and streamline data, providing procurement teams with important contract details including time and location information, as well as real time alerts such as contract breaches.
Here are five reasons why your business should be using an online contract management platform:
- Increased spend visibility
Using a CMS can give procurement professionals full visibility of suppliers, including the company name and location of where a product is coming from and in what quantity. This transparency will also help contribute to the risk management strategy of your business as it enables you to spot vendors who may be prone to environmental, economic and political uncertainty. In the current environment, for example, suppliers’ may have decreased or ceased production due to COVID-19 or could have been heavily impacted by the negative price of oil, making visibility increasingly important for businesses.
- Eliminates maverick spend
Centralising and streamlining contract documents will ensure that buyers can instantly access up-to-date information to see if a contract already exists. This helps buyers avoid simple and common mistakes that often occur when using manual filing systems, such as onboarding new vendors when existing agreements are in place with another supplier.
- Keeps track of contract renewals
It’s easy to forget about contract renewals or sign up for another term without ending an existing agreement, especially when using a traditional filing system. Businesses using an online CMS can set up renewal alerts in advance, allowing buyers sufficient time to source new vendors or negotiate better prices.
- Improves spend management
A centralised database means that all negotiated prices, contract conditions and other important transactions can be accessed in one place, making it easier to analyse spend. A CMS can help identify discrepancies, find where contract violations have occurred and deal with any associated problems.
- Adhering to regulatory and legislative compliance
It’s important to ensure that all suppliers are meeting the terms of their contracts. A CMS will automatically audit supplier information, meaning that any failures are immediately raised to procurement teams. The platform will also provide notifications if any new data is required or updates need to be made, avoiding potential legal issues.
It’s clear that using an online CMS will benefit your business and procurement teams by increasing spend visibility, enabling access to up to date information, ensuring contracts are closely monitored while contributing to the reduction of unnecessary spend. So, now’s the time to stop relying on those dusty old filing cabinets and start using a CMS.
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