Business and Personal Finance Management For SMEs

The fast-paced nature of running Small and Medium Enterprises (SMEs) often results in not having enough time to track your expenses and payments. However, doing so is the best way to keep your business on track.

With business and personal finance management tools like Boya, you can manage all your finances in one place. This includes paying your employees, tracking expenses, and automating recurring payments, as well as visibility on all your spending.

One of the most convenient features of Boya is that it allows you to transact instantly via  Mpesa, Bank, and card all in one place with no fees at all. This means that you can pay suppliers, contractors, landlords, and other people in just a few seconds. You can also allow your employees to use your prepaid visa card for company purchases.

Ultimately, you will have peace of mind when tracking your expenses.

What is Financial Management?

Financial management refers to the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. 

It is the specialized function directly associated with the top management. The significance of this function is not seen in the ‘Line’ but also in the capacity of the ‘Staff’ in the overall administration.

It involves planning, organizing, directing, and controlling the financial activities such as procurement and utilization of funds of the enterprise. 

Just like any other entity, financial management has its characteristics. Below are some of its attributes

Financial management is goal-oriented

Whether profit-making or non-profit making, every enterprise has to achieve specific goals. Financial management helps fix the objectives of an enterprise and achieve them in a planned and cost-effective manner.

Financial management is a decision-making process.

Decisions relating to the use of funds are very important as they directly affect the profitability and growth of an enterprise. The finance function has to decide what the firm should hold securities, raise funds, and the projects where funds should be invested.

With informed financial management services, you are sure of making the right decision.

What is the Main Objective of Financial Management?

The end goal of financial management is to ensure that a business has sufficient cash flow to pay its bills while also taking advantage of profitable money-making opportunities. It consists of multiple aspects that must be monitored, including its budget, income sources, and expenses.

All businesses, regardless of size, must carefully manage their finances to ensure profitability and solvency all through. But what are the objectives of financial management?

Profit Maximization

A business exists for no other reason other than to earn a profit. To achieve this goal, entrepreneurs must effectively manage their resources and account for all their spending. 

This will help them identify where they are making or losing money. As a result, they can reduce business costs, increase sales and set realistic goals. Using innovative tools like Boya goal a long way in boosting returns.

Values Maximization

Every business seeks to operate a profitable venture that benefits individuals and organizations with which it interacts. 

So businesses must adopt financial strategies that bring them maximum returns while at the same time being fair to customers and suppliers. 

That’s not all, as they must treat employees well through offering fair wages and other benefits like allowances. Remember, the employee’s financial wellbeing directly affects the performance of a business. Ultimately financial management seeks to maximize value while minimizing costs.

Liquidity

A small business firm must maintain a proper balance between profitability and liquidity. A profitable firm may be forced to close its operation if it is not liquid enough to meet its day-to-day obligations. 

So liquidity is also an important objective of financial management in the case of a small and medium-sized business. 

The firm must have sufficient liquid cash to pay its creditors when they ask for payment. It must also have cash reserves or short-term loans to meet any sudden emergency.

How Do Small Businesses Manage Their Finances?

Small businesses aren’t immune to the complexities of managing their finances. It can be even difficult for smaller organizations to stay on top of their finances. 

From dealing with cash flow issues to monitoring expenses, small and medium businesses face various financial management challenges that can prove to be hard to overcome. 

Yet, you don’t have to complicate financial management. Simple hacks like separating your business finance from personal finances to managing cash flow can help your startup stay profitable even during resilience. 

Here are tips to help you manage your business’s finances.

Separate Your Personal and Business Finances

Keep track of your business income and expenses separately from your finances. Using separate bank accounts for your personal and business finances gives you more control over each, which helps you see where your money is going while staying organized.

You can make use of Boya’s virtual expense card and mobile app to keep track of your business income and expenses without much hassle. You’ll also be able to send estimated invoices and track payments all in one place.

Create a Budget 

A budget is an essential tool for managing finances. Your budget should include all expected income and expenses for the next few months, allowing for unexpected situations such as an employee unexpectedly quitting or delaying a large shipment. 

It’s also essential to regularly revisit your budget, especially if there is any change in your business. You have a higher probability of scaling your business by reviewing your budget frequently, making adjustments, and tracking how well you’re sticking to it.

Cash Flow

Managing your cash flow is imperative whether you have $10,000 or $1 million in the bank. Your cash balance can fluctuate significantly from today, but it’s important to keep an eye on how much money you’re generating each month and how much is going out.

The chances are that your business will experience some seasonal fluctuations in cash flow throughout the year. If this is the case, you should set aside money in your savings account. Or put it into an investment account when you’re flush so that you can use the funds when business slows down.

Manage Your Business Finances With Boya

Boya allows you to manage your business finances more seamlessly and in an organized manner. Leverage our virtual expense card to make payments for online purchases and keep track of all employee payments and reimbursements for better decision making.

Eventually, this will make the expense management process easier, safer, and more effective. Draw lines between your business and personal finances and keep your business safe.

Wondering how to implement this? Let us help you go digital.