How to Budget Your Finance Operations

As a business owner, you must budget your finance operations to ensure each of your payments is made on time, and to the appropriate party. Finance operations is another way to say financial management; it involves all of the necessary bookkeeping to pay lenders, vendors, employees and other contractors. When you are writing checks to these individuals, you must make sure the checks will arrive on time, clear the bank and provide no further problems for your business.

Balance your Books

You cannot budget without a clear picture of exactly how much liquidity you have at any given moment. The most important step to budgeting your financial management is excellent bookkeeping. Ensure you are entering transactions into your accounting system, whether it is a ledger or a sophisticated software system, the day they are made. Each week, balance the book to make sure pending transactions have been noted where necessary. Any red flags, such as the actual cash in a checking account not totaling out to the appropriate record in your ledger, should be immediately addressed. Aside from helping with budgeting, balancing a book is the number one way to prevent theft, including identity theft and employee theft.

Create Deadlines and Reminders

The next step is to create a system of reminders for the payments you must make this month. Many business owners today choose an electronic system to remind them of bill payments; others elect to have automatic withdrawal of payments. In either case, you should have a handle on which bills need to be paid, and whether or not you will be able to pay them on time. This is particularly important if you are paying vendors will profits earned off the order you placed with them. For example, a restaurant may not be able to repay its wine vendor until it sells the inventory.

Pay High Interest Debts First

When it comes time to write monthly checks, you should have a prioritized list of payments, and there may be a number of checks that will need to be delayed. As a rule of thumb, debts with high interest should be paid off first. This includes your credit cards and loan payments. It is essential to pay lenders prior to vendors to protect your business credit. You must also make any necessary payments required by law, such as employee salaries and tax payments. Finally, you should pay vendors last only if you have the cash to do so.

Re-Structure Payment Plans

Of course, your vendors will not be pleased if you cannot make payments. This is part of your business cycle, and you can elect the steps to take next. Some businesses will pay vendors out of loaned money; they may use a business line of credit to do so. If you want to avoid going further into debt, though, it is wise to instead set up a payment plan where possible. Inform your vendors you are still awaiting sales, and you will pay the bill in part as those sales come in. As long as you are writing checks, most vendors will be accepting of this.

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