{"id":9,"date":"2024-02-26T00:15:33","date_gmt":"2024-02-26T00:15:33","guid":{"rendered":"https:\/\/fl.academy\/?p=9"},"modified":"2024-03-04T00:07:41","modified_gmt":"2024-03-04T00:07:41","slug":"make-informed-financial-decisions","status":"publish","type":"post","link":"https:\/\/fl.academy\/?p=9","title":{"rendered":"Make Informed Financial Decisions"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/fl.academy\/wp-content\/uploads\/2024\/02\/make-informed-financial-decisions-2--1024x576.png\" alt=\"\" class=\"wp-image-12\" srcset=\"https:\/\/fl.academy\/wp-content\/uploads\/2024\/02\/make-informed-financial-decisions-2--1024x576.png 1024w, https:\/\/fl.academy\/wp-content\/uploads\/2024\/02\/make-informed-financial-decisions-2--300x169.png 300w, https:\/\/fl.academy\/wp-content\/uploads\/2024\/02\/make-informed-financial-decisions-2--768x432.png 768w, https:\/\/fl.academy\/wp-content\/uploads\/2024\/02\/make-informed-financial-decisions-2-.png 1080w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>Small and Medium Enterprises (SMEs) face a variety of challenges with their business operations, one being efficiently and accurately maintaining bookkeeping. Maintaining business accounts is vital although without the right tools and knowledge this can be the driving factor which may lead your business to the ground.&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/www.researchgate.net\/publication\/367709865_Financial_Decision_Making-Skills_among_Managers_of_Small_and_Medium_En-terprises_in_Relation_to_Business_Performance\" target=\"_blank\" rel=\"noreferrer noopener\">Racaza (2022)<\/a> explains that SMEs main reasons for failure is caused by the follows;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Lack&nbsp; of financial&nbsp; planning<\/li>\n\n\n\n<li>Insufficient&nbsp; access to finance<\/li>\n\n\n\n<li>Lack of resources<\/li>\n\n\n\n<li>Unplanned expansion<\/li>\n\n\n\n<li>Poor strategic and financial forecasts<\/li>\n\n\n\n<li>Excessive&nbsp; fixed-asset&nbsp; investment<\/li>\n\n\n\n<li>Capital mismanagement<\/li>\n<\/ul>\n\n\n\n<p>It\u2019s a given in this case that SMEs must have good knowledge and resources to make informed financial decisions to ensure long term profitability. Let\u2019s run through a few methods which you can implement to make better financial decisions when running your business.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h1 class=\"wp-block-heading has-medium-font-size\" style=\"font-style:normal;font-weight:600\">1. Set Clear Financial Goals<\/h1>\n\n\n\n<p>Your financial goal for the quarter may be reducing overall expenses, improving revenue, improving profitability, reducing liabilities or expanding market share. Set these goals using the SMART objectives (Specific, Measurable, Achievable, Realistic , Time Bound) method to better understand what your goals are and how you intend to achieve them. By doing so you have your objectives set clearly which helps when the most turbulent times are upon the business, whilst also helping you to make the right decisions based on your priorities.&nbsp;<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h1 class=\"wp-block-heading has-medium-font-size\" style=\"font-style:normal;font-weight:600\">2. Create a Detailed Budget<\/h1>\n\n\n\n<p>Part of the organization of your accounting, keeping your budget clear, concise and detailed allows you to better understand your financial situation, providing you with the best level of transparency that you require.&nbsp;<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h1 class=\"wp-block-heading has-medium-font-size\" style=\"font-style:normal;font-weight:600\">3. Track Income and Expenses and Incorporate Technology<\/h1>\n\n\n\n<p>Maintaining your financial statements is crucial to gain insight on your business\u2019s health and current standing. Use accounting software to automate bookkeeping, facilitate financial statements and to generate financial reports to help make this process efficient, convenient and to reduce the amount of human error.<\/p>\n\n\n\n<p>Additionally, exploring cash flow forecasting tools, expense tracking apps and cloud based financial platforms allows you to track your current income and expenses and to understand the possibilities of the future period\u2019s performance to better understand your business\u2019s progress and financial stability.&nbsp;<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h1 class=\"wp-block-heading has-medium-font-size\" style=\"font-style:normal;font-weight:600\">4. Separate Business and Personal Finances<\/h1>\n\n\n\n<p>If you are a SME that does not have its own separate bank account, it\u2019s time to set it up. It is very important to ensure your personal and business finances are separate to easily manage taxes and to get a clear understanding of your business\u2019s financial stability clearly. Further it helps to protect personal assets from business liabilities.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h1 class=\"wp-block-heading has-medium-font-size\" style=\"font-style:normal;font-weight:600\">5. Establish an Emergency Fund<\/h1>\n\n\n\n<p>A backup plan is better than nothing. Ensure you have created a contingency fund for your business where the cash is exclusive for unforeseen business expenditures or to help maintain liability costs during periods of low revenue. This cash should not be used casually. Similar to personal savings, treat this fund as a business\u2019s savings which is tapped into only when needed.&nbsp;<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h1 class=\"wp-block-heading has-medium-font-size\" style=\"font-style:normal;font-weight:600\">6. Manage Business Debt<\/h1>\n\n\n\n<p>&nbsp;If your business has outstanding debts, plan out how you will pay your debtors according to the time and accrued interest rates. Keeping debtors for a long period of time makes it harder to pay them off. Additionally, ensure you have a healthy balance between debt and equity to ensure you do not get cornered into financial risk in the future.&nbsp;<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h1 class=\"wp-block-heading has-medium-font-size\" style=\"font-style:normal;font-weight:600\">7. Optimize Tax Planning<\/h1>\n\n\n\n<p>Ensure you are familiar with the applicable tax laws for SMEs. Get professional help to identify credits, tax deductions and incentives. Efficiently planning your taxes helps you to minimize your tax liabilities.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h1 class=\"wp-block-heading has-medium-font-size\" style=\"font-style:normal;font-weight:600\">8. Implement Effective Invoicing and Payment Systems<\/h1>\n\n\n\n<p>Have discipline in your methods of finance management. This means to streamline your invoice process, keep clear communication between your accounts receivable and follow up on them promptly when they are overdue.&nbsp;<\/p>\n\n\n\n<p>Additionally, using accounting software for this process to automate some of these processors or to streamline and make these processes efficient can greatly benefit your business.<\/p>\n\n\n\n<p>In conclusion, staying on top of your finances is crucial in determining your business\u2019s financial stability and gives you a better understanding on how your finances operate, while allowing you to see potential issues before they occur and to be ready in case your business is going through a turbulent time period. Regularly reviewing financial performance and seeking professional advice is valuable in addition to these steps to ensure your progress is done correctly.&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Small and Medium Enterprises (SMEs) face a variety of challenges with their business operations, one being efficiently and accurately maintaining bookkeeping. Maintaining business accounts is vital although without the right tools and knowledge this can be the driving factor which may lead your business to the ground.&nbsp; Racaza (2022) explains that SMEs main reasons for [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[4,5,6],"class_list":["post-9","post","type-post","status-publish","format-standard","hentry","category-sme-business-advice","tag-accounting","tag-financial-literacy","tag-sme"],"_links":{"self":[{"href":"https:\/\/fl.academy\/index.php?rest_route=\/wp\/v2\/posts\/9","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fl.academy\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fl.academy\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fl.academy\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/fl.academy\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9"}],"version-history":[{"count":7,"href":"https:\/\/fl.academy\/index.php?rest_route=\/wp\/v2\/posts\/9\/revisions"}],"predecessor-version":[{"id":52,"href":"https:\/\/fl.academy\/index.php?rest_route=\/wp\/v2\/posts\/9\/revisions\/52"}],"wp:attachment":[{"href":"https:\/\/fl.academy\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fl.academy\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fl.academy\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}