7 Money Management Tips For Your Horse Business
Looking for Ways to Keep Your Horse Business Afloat? These Money Management Tips Will Help
Like every other horse business owner, you probably don’t like being strapped for cash. An unexpected emergency vet bill or event cancellation can give your bank account a beating and lead to a cash flow crisis. Even without an emergency, it’s easy to mismanage your cash flow during the day to day routine, especially if you don’t have the right strategies in place. Proper management of the money you have can mean the difference between business failure and success.
What Does Money Management Involve?
Whether it is for personal or business, money management is having the proper measures in place to handle your money well. Such measures include having a budget, setting actionable goals, keeping track of the income and expenses, and investing your cash in profitable ventures.
If you adopt a robust money management plan, it becomes easier to keep your cash flow intact. Plus, with the right strategy, you can monitor your business expenses to help you cut unnecessary costs. But if you don’t manage your finances well, you will have numerous problems running the business, including paying your suppliers late and at worst, potentially going broke.
8 Simple Horse Business Money Management Tips
Managing your business’s cash flow can be a daunting task. In case you are experiencing challenges keeping your business operational because you mismanage the cash, here are few tips to gain better control of all your business’s money.
1) Increase Revenue and Cut Costs
You may think that these tips are obvious but it can be challenging to increase revenue and cut your business costs at the same time.
The first thing to do towards achieving this goal is to know your overhead costs. You can calculate overhead costs in 3 easy steps – based on your past year’s expenditure, monthly overhead costs, and considering the individual expenses for each month.
Working out your overhead costs helps you make a sound budget and predict the amount of money your business needs to run smoothly each month. Additionally, this approach gives you a comprehensive overview of the expenses that you may be able to cut each month. Are there cheaper alternatives? Do you need that monthly subscription? Can you negotiate a better deal from your phone provider? Cutting unnecessary expenses means you’ll make more profit instantly.
Increasing revenue can take longer to action but is the only way you can grow your equine business over time. One of the easiest ways to increase revenue is by upping your prices or by selling packages instead of one off services. If that sounds of interest, click here to read our blog post that explores how to develop a more profitable equine business.
2) Have A Budget
A budget is a critical element of financial management for your business. It helps you project how much money to earn and spend over a given period. Additionally, a proper budget gives you a clear outline of the activities you should engage in throughout the specified period.
Having a budget is not enough – you need to be keen on sticking to it. Creating and keeping up with a budget makes it easy to handle your cash flow because the most appropriate budget should have revenue and expense goals.
A budget outlines your monthly and yearly expenditure, which eases your management of money because you are aware of how much to spend based on your projected income. Moreover, it pushes you to work extra hard so you can keep up with your income goals.
3) Don’t Mix Personal and Business Funds
Your personal needs are different from your business’s needs, and this should stay like that even when it comes to finances. Keeping your funds separated, especially in separate bank accounts, will help you avoid using your business funds for personal activities. Depending on the legal structure of your business, it may also be a mandatory requirement.
Having a separate bank account for your business is always advisable for tracking purposes. Good business financial management requires you to monitor your company’s profitability, reconcile your books, and track expenditure. You cannot do all these when you have personal and business funds mixed.
4) Monitor Your Accounts Receivable
Usually, you won’t expect payments for all the goods you supply or the service you render immediately, especially for credit sales. In these cases you may tend to forget that you have unpaid bills. To better manage your business income, it is advisable to keep a record of all the money owed, the date that payment falls due and always follow up promptly with your debtors. In your records, include a summary of the accounts receivable and continually monitor the total amount. Such an overview will tell you which client hasn’t paid, the due date, and the total amount owed.
Despite monitoring your receivables being an essential element of money management, what is more critical is getting paid. Always send your invoices early and keep your clients in the know that they have unpaid invoices. Providing easy payment options such as direct debit or accepting debit and credit card payments can encourage prompt payment.
5) Monitor Your Ongoing Expenditure
Good money management requires that you keep a record of the amount of money needed in your business each day, week, month, and year. Monitoring expenses helps you plan better for future spending. Additionally, if you don’t track your expenditure, it becomes easy to misuse funds and overspend.
If you have several accounts – credit card account, savings account, and checking account – it is advisable to record the amount you spend from all of these accounts at a given time. Be mindful of small expenses, which can add up so fast, and before you know it, you will have spent a considerable chunk of your income.
6) Adhere to Deadlines
Deadlines are very crucial aspects of business financial management. Failing to keep up with deadlines such as when to pay bills, due dates for accounts payable, or payment of your business loan can have a significant impact on your cash on hand. Additionally, failing to pay your bills on time can lead to bad business relationships, unnecessary interest, and damaged credit.
Staying on top of your deadlines can help you avoid incurring additional costs on your bill payments or ruining your reputation with your suppliers. Set alerts for all your payments, so you do not have to pay bills late anymore. You can use your smartphone as a reminder or mark the due dates on your calendar or in your diary.
7) Manage Your Inventory
If your business involves buying goods to resell, proper inventory management is essential for your business’s growth. How many times have you had to dispose of goods at a loss because you ordered too many of them? Or, perhaps there are instances when you have orders from your customers, but you cannot sustain them because you have run out of stock?
If you manage your inventory well, you won’t have shelves of dead stock or unserved customers. Additionally, proper inventory management translates to better cash flow for your business.
Make sure you monitor your daily, monthly, and yearly inventory, so you don’t have too much stock than is needed or fewer than the demand. It is vital to keep a record of all the items you purchase and sell each day, week, month, and year so you can determine how much inventory can sustain your business over a given period. A good point of sale system can help to give you this information quickly and easily.
Inventory management isn’t only for retailers. Livery yard owners and professional riders will often have cash tied up in feed, hay and bedding supplies. Buying in bulk is often necessary to secure supplies or to get more competitive pricing but be aware of the impact on your cash flow and plan for it.
8) Keep A Cash Reserve
Whilst you may achieve a better cash flow for your business by following the tips above, you need to set aside some amount for the unexpected.
A business cash reserve will come in handy in case of an emergency. Your cash reserve can be in the form of a business savings account. Make sure that you deposit into the account more regularly than you withdraw. The amount you keep in the account is relative to the size of your business but having between 3 and 6 months of operating expenses set aside can help you sleep better knowing that you have a cushion in a cash flow emergency.
Good money management practices are crucial for the success of your horse business. The above tips will help you improve your money management and set you up to improve your business’s cash flow. If you want to go deeper into this topic, EBA members have access to an online masterclass on cashflow in the training vaults here https://members.equinebusinessassociation.com/7-steps-to-a-healthy-cash-flow-masterclass/