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We all agree that one of the prerequisites for a successful business is, of course, proper money management, and that’s really not just keep good accounts, but what kind of decisions we are taking with respect to money from the company. The intention here is to set aside the complicated explanations and share some principles that, if the owner or manager of a business that manages to become habits, they may ensure that the money is managed properly.

Principle # 1: Good stewardship
A company is like a tree that is planted, requires time and care before they can bear fruit. If we begin to prune when the tree is still small and growing, it will become a “bonsai” (dwarf tree), or worse, will dry and die. In other words, if the owner of a company “pulls” resources beyond the capacity of the latter, one of two things happen: it is dwarf or die. Make sure the owner himself should be seen only as the manager or “steward” of the company, or someone who is entrusted to its care and must submit accounts to the true owner. In my experience, I have seen small business owners grow rapidly when really apply this principle. How can this “relationship” is fair? Assigned to the “foreman” wages (and strictly limited to it) is regarded as fair by their work, but also that the company is in a position to pay. For example, if the salary is $ 10,000.00 not defined shall have an even more 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” to believe that in the end are deductible taxes, leaving it “in the name of the company. Be patient and you will have time to make these costs when the business permit and that if done early, will be “trimming” your business.

Principle # 2: There must be balance between the inputs and outputs of money in a company
Broadly speaking, there are only two important ways that money to the company for an injection of capital (which may be an investor, the support of an institution or a loan), or revenue from sales. By the way, these are the only ones who truly make it profitable and healthy, because if there is no sales revenue, any capital injection will be “throw good money at bad.” On the other hand, outflows of money are cataloged in costs (purchase of raw materials or the products the company sells, etc..) Operating expenses (salaries, rent, etc..) Investments (in machinery, furniture, or publicity), and finally, utilities (which has been after all the other exits). It is vital to respect the hierarchy in terms of outflows of money, if “we” stayed on duty and utility costs or operating expenses, we are only making fools, because in reality there is no such “profits”. We can summarize as follows: can not leave anything that has not come first. The problems begin 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 harvesting
Have you heard of the law of sowing and harvesting? What you sow is what we will reap. Sow little and poor harvest, sow and reap in abundance with abundance. This saves a lot of principle regarding the previous two. As owner or manager you are an example for your employees, suppliers and customers. So to the extent of the potential for the company, always at decent wages, an employee hired to sow more, if the activity they demand, instead of “black” who has more, always one or two courses training per year, sow in raw materials of good quality and reliable suppliers (although not the cheapest), always giving you a little extra to the customer, always engage in at least a bit of publicity. Sow advised by professionals to make important business decisions and improve their business. Not trying to say that you must reinvest all profits obtained (although it is always advisable to start), but to implement this instead of wanting to plant all the profits to keep you “anemic” to your company and see the results.

Principle # 4: Do not buy anything you do not know exactly how it will sell or use
Sadly I have come across many companies (especially those with little time to have started), which cast him great operating expenses and invest heavily in furniture and equipment, but do not yet know how or by whom they will sell their products . There are those who first rented a room “well placed” buy a nice desk and a computer (or network of computers) very powerful for the “administration” of the business, hire Broadband Internet and phone lines (because they offer ) 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 they think keeping all this? Remember that sales revenues are the only way that a company is healthy. In an extreme case it is better to start (and you would not be the first to do it) working from home with a cell phone, using the free email account in an Internet cafe and a good (and land) business idea, but focusing first getting customers and close sales, which focus on compromising the company’s stock before achieving the first order. Unless you are a business open to the public facilities nice help, but they alone will not get customers. Although sales revenue if it is allowed, then forward, always in his company. Please avoid the “bargain” offers, and if the business does not really need at this time. Do not buy unnecessary things “only” because they are tax deductible and because “we have to VAT, this tax can help in the short term but in the long run is a very harmful practice. One more thing, also helped avoid “do it yourself” in order to save. Remember that the goal of a company is making money selling their products or services, save on costs and expenses. In theory, sales can grow without limit, but in theory the cost but can not get to zero. So instead of losing (you or your staff) excessive time trying to learn to do something they do not know and do NOT have to know, better come to pay him a reasonable price to an expert (who will surely better and more fast), and devote that time to address the issues of your business.

Principle # 5: either sold or rotten
This is a popular saying among the traders of fruits and vegetables, and means that you should never “underselling” the products or services of your company, to sell only “somewhat.” If you do not believe in the value of what you offer, your customers will not. Remember that your profit margin is where you pay for operating expenses, for investment in the business, and ultimately, profits.

Principle # 6: Never trust
One thing is give credit, it is something quite different trusted. If we intend to give credit to our customers, we must first see how much potential there that we do not pay (and if the company is in a position to take that risk), and must have someone in charge of collecting, give “weapon” to his work and signed promissory notes, acknowledgments, contracts, etc. (because it is certain that will be needed). If we do this, trustworthy is the closest thing to love our product or service (which by the way, we do not give us) and we will have to spend time and money to recover that distract us from selling or taking care of business. Do not do it! You have not really sold on your product or service if it has not been able to charge for it.

Principle # 7: Always keep a cash reserve
This is probably the principle that requires less explanation: quite simply, the unexpected occurs. Although this varies depending on the shape and size of the company, in general I recommend that efforts be made to have at least the equivalent of 3 months operating expenses as a reserve of cash. And please, do not save “under the mattress”, ask your bank for an investment instrument according to their needs.

One of the most important benefits of applying these seven principles that are focused on protecting the business’s working capital, which is like “oil” that allows the engine of your business function well and to generate sales revenue. As we see, is not so complicated to make good decisions about money management, if based on good business practices.

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