Manage your Finances and Keep your Enterprise in the Pink of Health

Many women entrepreneurs tend to get overwhelmed with finances. Although managing finances can be a challenge for any small business owner, it is one aspect that can never be ignored.

Proper management of your finances stabilizes your company and makes your business less likely to fail. If you don't have a lot of experience with managing business finances, it can feel like a chore and you could be slipping into bad financial habits that could one day harm your business.

Given this backdrop, Saturday Fare spoke to a few financial consultants to offer some easy tips and solutions to entrepreneurs in the MSME sector.

"In my experience I have seen that women entrepreneurs particularly prefer to completely (and in some cases partially) outsource the responsibility of planning and managing finances to either their family members (most often a husband or father) or to a professional consultant. While there is nothing wrong with this approach, I must emphasize that by not getting into the nitty gritties of finance the entrepreneur actually dents her scope of owning a truly optimal and flourishing business/enterprise. After all unless one is adequately conversant about money, she cannot make strategic or insightful business decisions on her own," says Mohit Jain an independent financial consultant.

He reiterates that the most important step for any business owner is to educate themselves. "By understanding the basic skills needed to run a small business like doing simple accounting tasks, applying for a loan or drafting financial statements the business owners can create a stable financial future and avoid failure. In addition to education, staying organised is a major component of sound money management," he explains.

Interestingly, if you are running a small business, it can be easy and even tempting to try and put everything into day-to-day operations. "However, small business owners should not overlook their own role in the company and should compensate themselves accordingly," cautions Jain and explains, "They should ensure that their business and personal finances are in good shape. Also in addition to paying themselves it is important to set aside money and look into growth opportunities. This can allow the business to thrive and move in a healthy financial direction."

According to Shweta Verma, another financial consultant, women entrepreneurs are not generally very forthcoming about loans. "Yes loans can be scary. They can lead to worries about the financial repercussions that accompany failure. However, without the influx of the capital that one obtains through loans, the entrepreneur may face substantial challenges while trying to purchase equipment or grow the business team. The entrepreneur can also use loan proceeds to boost her/his cash flow and thus face fewer issues paying employees and suppliers on time," Shweta advises.

Highlighting the importance of maintaining good credit (that is inextricably also linked to loans) Shweta says, " As your company grows, you may want to purchase more commercial real estate, acquire additional insurance policies and take out more loans to facilitate all these pursuits. With poor business credit, getting approval for all these transactions and acquisitions can be more difficult. To keep good credit, pay off all your debt funding as soon as possible. For instance do not let your business credit cards run a balance for more than a few weeks. Likewise, don't take out loans with interest rates that you cannot fford. Only seek funding that you can quickly and easily repay."

Both Mohit and Shweta also reiterate the importance of monitoring one's financial books.

"This is an obvious practice, but a very important one. Do your best to set aside time each day or month to review and monitor your books, even if you are working with a bookkeeper. It will allow you to become more familiar with the finances of your business," says Mohit.

It is also vital to focus equally on expenditures and ROI.

Measuring expenditures and return on investment can give you a clear picture of which investments make sense and which may not be worth continuing. "Focus on the ROI that comes with each of your expenditures," said Shweta and added, "Not doing this means that you can lose money on irrelevant or bad spending bets. "

Establishing internal financial protocols, even if it is as simple as dedicating a set time to review and update financial information, can go a long way in protecting the financial health of a business. "Keeping up with your finances can also help you mitigate fraud or risk. Moreover there will always be business issues that need to be addressed today, but when it comes to your finances, you need to plan for the future," sums Shweta.

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