subject: 7 basic principles for the company's financial health [print this page] 7 basic principles for the company's financial health
We all agree that one of the prerequisites for the success of a business is, of course, the proper handling of money, and that's really not just get along accounts, but what kind of decisions we are taking with respect to company money.
The intention here is to leave aside the complicated explanations and share some principles that, if the owner or manager of a business does become a habit, can ensure that the money will be handled properly.
Principle # 1: Good stewardship A company is like a tree planted, takes time and care before they can bear fruit. If we begin to prune the tree when it is still small and growing, it will become a "bonsai" (dwarf tree), or worse, will dry up and die. In other words, if the owner of a company "pulls" resources beyond the capacity of the latter, one of two things happen: keep a dwarf or die.
To prevent this from happening, the owner must see himself only as the manager or "steward" of the company, or someone who was entrusted with their care and must submit accounts to the rightful owner. In my experience, I've seen small business owners grow rapidly when really apply this principle. How can this "relationship" is fair? Being allocated to "butler salary (and strictly limited to it) considered fairly for their work, but also the company is in a position to pay. For example, if the salary is $ 10,000.00 delimited should not have even a single weight. Do not rush and buy luxurious things (especially cars for personal use), only that "we have to impress clients with a good image," nor was "health cure" thinking that the end of the deductible taxes, then go "on behalf" of the company.
Be patient and you will have time to make such expenditures as business permits, and that if done too soon, will be "pruning" your business.
Principle # 2: There must be balance between inflows and outflows of cash in a company (Finanzas)
Overall, there are only two important ways that among the company money, for an injection of capital (which may be an investor, the support of an institution or a loan), or by income from sales. Incidentally, these are the only ones who truly make it profitable and healthy, as if no sales revenue, any capital injection will be "throwing good money after bad."
On the other hand, outflows are cataloged in costs (purchase of raw materials or products that the company resells, etc.) Operating expenses (salaries, rent, etc.) Investments (in machinery, furniture, or publicity), and finally, profits (what is left after all other outputs). It is essential to respect the hierarchy in terms of outflows, if "we" and we owe utilities costs or operating expenses, all we're doing stupid, because there really is no such "profits." We can summarize as follows: you can not leave anything that has not come first.
The problems start when we put more emphasis on outputs than inputs. It is important to take care not to spend excessively, but more importantly increase sales revenue.
Principle # 3: The law of sowing and reaping Have you heard of the law of sowing and reaping? What you sow is what we will reap. Sow sparingly and reap sparingly, sow and reap abundantly abundantly. This principle bears much relation to the previous two. As owner or manager you are an example for their employees, suppliers and customers. So far the potential of the company, plant in decent salaries, sow by hiring another employee if the work demands it, rather than "black" already has more, planting one or two courses training a year, sow in raw materials of good quality and reliable suppliers (although not the cheapest), always to give a little extra to the customer, plant to hire at least a little publicity. Sow advice of professionals to make important business decisions and improve their business. Not trying to say that ALL must reinvest profits earned (although initially it is always advisable), but put into practice to plant this instead of wanting all the profits for you maintaining "anemic" to your business and see the results. Principle # 4: Do not buy anything you do not know exactly how you will sell or use Sadly I have found many companies (especially those with little time to have started), which are cast in tow large operating expenses and invest heavily in furniture and equipment, but do not yet know how or through whom to sell their products . There are those who first rented an office "well placed", they buy a nice desk and a computer (or network of computers) very strong to carry the "administration" of the business, hire broadband internet and two phone lines (because they were offering ), and have a nice financial business model designed to 5 years, but have not yet had sales revenue that mean more than a few pesos. So, what plan to maintain all that? Remember that sales revenues are the only way a company is healthy.
In an extreme case is preferable to start (and would not be the first to do it) working from home with a cell phone, referring to the free email account at an Internet cafe and a good (and grounded) business idea, but focusing first on getting customers and close sales, which focus on engaging the capital of the company before getting the first order. Unless you are a business open to the public, some nice facilities help, but by themselves do not get customers. Even if sales revenue and allow it, then go ahead, sow in your company.
Please avoid the "bargain" and offers if the business really does not need at this time. Do not buy unnecessary things "only" because they are tax deductible and because "we have VAT payable to" tax that may help in the short term, but ultimately is a very harmful practice.
One more thing, do not also help "do it yourself" in order to save. Remember that the goal of a company is making money by selling their products or services, save costs and expenses. In theory, sales can grow without limit, but also in theory but can not get costs down to zero. So instead of losing (you or your staff) too much time trying to learn to do something that can not do, and NOT have to know to do, better pay him a reasonable price to an expert (who probably will do better and more fast), and spend the time to address the issues of your business.
Principle # 5: either sold or well-rotted This is a popular saying among traders of fruits and vegetables, and means that you should never "bargain away" products or services of your company, only to sell "even if it is something." If you do not believe in the value of what you offer, your customers will not either. Remember that your profit margin is where it comes to pay operating expenses for investments in the business, and ultimately, profits.
Principle # 6: Never trust One thing is give credit, and quite another to be trusted. If we intend to give credit to our customers, we must first see how many possibilities there that we do not pay (and if the company is poised to take that risk), and we must have someone in charge of collection, giving "weapons" to do their job, and signed promissory notes, receipts, contracts, etc. (because it is certain they will be required.) If we do this, we are simply trusting, and trustworthy is the closest thing to give your product or service (which by the way, we do not presents), and we have to spend time and money to collect (and perhaps habrnosla bought someone else might spot) that distract us to be selling or serving the business. It is a grave mistake trusting end in order to "sell." Do not do it! You have not actually sold their product or service if you can not charge for it.
Principle # 7: Keep a cash reserve ( negocios exitosos)
This is probably the principle that requires less explanation: quite simply, the unexpected occurs. Although this varies depending on the rotation and size of the company in general I recommend that you try to have at least the equivalent of 3 months of operating expenses as a cash reserve. And please, do not save "under the mattress", ask your bank for any investment vehicle to meet your needs.
One of the most important benefits of applying these seven principles is that they are aimed at protecting the business's working capital, which is like "oil" that allows the engine to run your business well and generate sales revenue.
As we see, is not so difficult to make good decisions about money management, if based on good business practices. Now, I invite you, with a vision of long-term business, think about the 7 principles, and consider the next time you need to make decisions in your company money. Csar Ivn Daz is an industrial engineer and Organizational Systems by ULSA and has an MBA in Finance from the UNAM. He is a consultant and lecturer on strategy and continuous improvement, and Doxa Solutions managing partner in consulting firm specializing in SMEs.
