Money is essential for any business’s success. Find out 5 ways to spend money wisely and grow your business.
MSMEs and small business owners that fail frequently do not comprehend cash flow. They lack the funds to re-enter the market, stifling growth and scaling-up chances. During the COVID-19 epidemic, many entrepreneurs faced such difficult challenges.
As a result, SMB and MSME owners should be aware of and comprehend certain critical ideas for making better use of their money and growing their businesses faster.
Here are the 5 top ways to spend money wisely and grow your business:
1. Cash projections
One of the most crucial components of running a business is cash forecasting, which forecasts the flow of cash in the firm. Ratish Pandey is the creator of Ethique Advisory, which offers business coaching and consulting with a “customer-first” approach.
According to the business coach, a rolling 90-day cash forecast offers the entrepreneur an idea of how much revenue will be required to cover costs. This, in reality, enables good planning — whether it is aimed at lowering costs or increasing Days Sale Outstanding (DSOs), resulting in improved cash management — relieving the entrepreneur of the concern of timely payment of salaries and other obligations.
2. Managing the financial shortage
Ratish proposes that entrepreneurs focus on lowering cash gap difficulties by negotiating payment arrangements with creditors.
“It will be extremely beneficial to pursue and retrieve the money in a timely manner. Working with suppliers on payment, releasing working capital, utilizing new-age techniques such as bill discounting, and obtaining particular finance for raw materials (unique to manufacturing enterprises) would also be incredibly beneficial in minimizing the cash gap,” he notes.
According to Ratish, examining operational efficiency to reduce mistakes will also aid in the seamless flow of funds.
3. Keep track of your costs
When a firm is going well, entrepreneurs, according to Sumit Agarwal, Founder of Vyapar — a business accounting and inventory management solution for SMBs — do not pay enough attention to superfluous costs (where the majority of the money goes).
“Tracking daily costs is critical in business. This can be accomplished in two ways: manually or digitally. A computerized tool can track weekly and monthly costs and omit the superfluous ones, saving a lot of money that they may utilize in other critical activities,” Sumit adds.
He continues, “weeding out superfluous company expenditures ensures liquidity in the firm and accelerates growth.”
4. Cut back on unneeded marketing costs
Sumit believes that entrepreneurs should cut back on marketing expenses that aren’t producing results. He gives one example, saying,
“We see banner and hoarding ads, and some company owners give leaflets to promote their products.These are effective methods for increasing brand remember but not for tracking and generating leads. Marketing that creates leads must be invested on.”
He emphasizes the need of businesses focusing on internet advertising to promote their online store or business directly to their target market. This will save them a lot of money, which they may put into lead generating marketing.
5. Correct financial understanding
According to Ajay Thakur, Head, BSE SME and Startup, small enterprises and MSMEs require adequate financial people to maintain track of their money.
“Many times, businesses experience losses due to a lack of financial abilities, therefore it is critical to seek expert assistance,” he explains.
These companies also rely on informal channels for loans with higher interest rates, leading in debt and overspending. Ajay adds that entrepreneurs must grasp money in order to make better use of funds in their businesses.