As we approach the end of 2021, now is a good time to take a step back and consider what you can do to get your small business’s financials in order. Because of the uncertainties that accompanied this year, this maxim bears even more weight in 2022.
Why do you need to set financial goals for your business?
Managing your finances entails far more than simply entering numbers into a spreadsheet. Effective financial management is proactively preparing for your company’s long-term future, whether you’re rescuing a sinking ship or launching a new venture.
In order to make the most of your resources, you must set financial management goals. Establishing clear goals, realistic budgets, and reachable benchmarks for budget maximization, cash flow, and risk management will help you develop a solid financial foundation.
Financial Management Goals for Businesses in 2022
Here are 4 financial management goals you can include in your business resolution for 2022:
1. Examine and outline your monthly budget
Believe it or not, 61% of small firms lack a recorded budget.
When you’re a one-person team with solid financial management, this may not matter as much. However, as your small business grows, you should consider creating a budget and tracking monthly cash withdrawals. This will not only provide you better visibility into where your finances are, but it will also improve your cash flow and help you identify areas where you may be able to save money.
You can’t optimize your company’s spending habits if you don’t know what they are in the first place. By examining your expenditures each month, you may identify areas for improvement, have more control over your finances, and track your progress.
2. Eliminate high-interest credit card debt.
While there is such a thing as “good debt,” high-interest business credit card debt is not one of them.
Nonetheless, according to a recent research, roughly one out of every four small businesses carries a credit card balance each month. Furthermore, half of those polled claim they carry a balance from time to time. If you contribute to either of those amounts, you should do everything you can to settle your balance as soon as possible. Otherwise, you’re squandering your money.
Not only are credit card interest rates unnecessarily high, but when you simply make minimum payments each month, you end up paying interest on interest. Depending on how high your balance is, it might lead to a debt spiral that is extremely difficult to escape even in the best-case situation.
Once you’ve paid off your company credit card debt, make it a habit to pay off your balance in full each month. Use credit cards for convenience and to earn rewards points.
3. Manage Your Cash Flow
Whether your company is expanding or struggling, efficiently managing your cash flow can mean the difference between survival and failure.
If you’ve depleted your working capital, you may face a cash crunch that stops you from paying suppliers or even employees. That’s why it’s vital to maintain a level of working capital that helps you to keep the firm running even when things go tough.
One of the best ways to achieve that is by analyzing your margins.
At its foundation, financial management is about increasing efficiency. By examining your margins, you can identify and strategically prune inefficiencies in your business. If you’re wasting money on unnecessary expenses, make some changes.
4. Make an investment for the future.
To combine both short-term and long-term financial goals, invest more money in your company’s future.
A short-term goal could be to invest in new tools and technologies to boost productivity. For example, if you’re still managing your accounting with spreadsheets or worse, you should look at accounting systems like Quickbooks or Xero. Not only will this give you more control over your finances, but it will also allow you to recoup time and reinvest it in other parts of your business.
Over time, you may discover that a small investment like this allows you to devote more time to developing better services, targeting new customers, or developing more persuasive marketing efforts.
With a professional CFO and accounting service, you can achieve your long-term business goals much more easily. If your books and record-keeping are disorderly, your entire organization will be unorganized, and growth will be stalled. Fortunately, Today CFO’s financial experts can assist you in eliminating some of the guesswork from your finances and keeping everything on pace. Request a free consultation with Today CFO to understand how you can achieve your financial management goals with our services.