Why do so many businesses fail to make profits and achieve their financial goals? The answer is simple because many business owners simply ignore one or more of the 5 keys to financial success. Many businesses are making sales but are not profitable. Learn how to fortify your business model and set your company up for success. Developing a financial business model provides a clear picture of your company’s financial history as well as your company’s financial future. Working from a financial business model will help to prepare your company to make better decisions for the company in the future. And analyzing your finances on a regular basis will provide you with the financial success you are seeking to achieve. Get ready to gain more flexibility and financial freedom in your company with the keys to success.
Key #1) Don’t Go It Alone
Mismanagement of finances is not reserved for start-up companies but for all businesses. Many business owners are able to produce and sell their products and services but are not able to manage their finances. If you are not able to determine where you have been you will not know where you are going. Accountants and bookkeepers are able to assist your company with establishing a financial foundation and making predictions surrounding your financial future.
Key #2) Review Historical Data
By developing a financial history of your company’s finances provides you with valuable lessons for the present that will guide you into a more profitable future. Reviewing financial history helps you to know what to do and what not to do in your business. Compiling historical financial data can help your bookkeeper or accountant to assess the reasons for your success or failure.
Key #3) Project Sales and Costs
Once you have completed the second key it will set you on the trajectory to be able to project the sales and costs. Projecting sales and costs without historical data can be challenging but not impossible. Projections for your company are not a process that begins at the start-up phase, it is an on-going process to help determine areas of growth and change. Costs are always easier to project than sales. However, sales should not be your main focus but rather on the company being profitable!
Key #4) Develop Financial Statements
Financial statements are the framework for the accounting cycle. In other words, the income statement, the balance sheet, and the statement of cash flows provide a picture of how well your company is doing financially. Financial statements structure all financial data in a manner that is easy to understand and should be prepared with accuracy. These statements assist you with assessing financial performance and determining key business decisions.
Key #5) Assess and Implementation of Changes
This is the final piece in the financial business model. Once all of the first four keys have been established you will be able to assess your company’s financial position and implement changes where it is necessary to ensure financial growth and success. Tying it all together the financial statements will reflect your company’s historic information and decisions can be made about the future from that data.
The ease of making financial transactions and financial services in general, had first been revolutionised when telegraph companies introduced wire transfers. But with the coming of new age financial services like Bitcoin and Ripple, it is the time we address the question of what the future holds for the financial services of the world.
Traditional Wire Transfers
Let us begin by first taking a look at how things have been going on for these past 150 years since wire transfers were first introduced. Transferring funds using a wire transfer method via a bank is not a single step process but a multi-step process. It is like this:
- The sender approaches his or her bank and orders the transfer of funds to an account. Unique codes like BIC and IBAN codes are provided to the bank by the sender so that the bank knows exactly where the funds need to be transferred.
- The sender’s bank contacts the receiver’s bank by sending a message through a security system, such as Fedwire or SWIFT, signalling it that a transfer needs to be made. The receiver’s bank receives this message, which includes settlement instructions as well, and then asks the sender’s bank to transfer the amount specified in the message.
- The sender’s bank now transfers the amount. This is not done in one go but bit by bit, so it can take anywhere from a few hours to a couple of days for the entire sum to be transferred.
- To make the transfer, the two banks must have a reciprocal account with one another. If that is not the case, the transfer is made through a correspondent bank that holds such an account.
As one can see, this form of transfer relies overly on a mediator, takes more time than it should, and can prove to be costly as the banks charge some fee for their service. Distributed currencies like Bitcoin provide a viable alternative to this process.
What sets services like Bitcoin apart from traditional services is that they do not rely on a central mediator but rather operate using cryptographic protocols. The process is therefore faster, simpler, and much more efficient. The system is quite transparent to both end users as well while traditional systems are susceptible to fraud due to the complex process involved.
However, there is a downside to this too. With services like Bitcoin, it is simple to trace a transaction back to each unit value’s creation.
Solution? A Common Ground
More and more people are opting for services like Bitcoin and peer-to-peer mobile transfers, where a network operator could help users transfer funds by simply sending an SMS. Although these are indeed more efficient, they are a long way from global acceptance because there are many who still do not have bank accounts, plus there is the issue of limited user identification in such services.
What would be ideal for everyone is if banks could tap into the potential of decentralized currencies and overlap the source code of services like Ripple on their existing system to form a hybrid of the two. It would kill two birds with one stone as:
- Decentralized currency systems provide more efficient transfers
- Bank systems ensure only registered users access the service, taking away the possibility of foul play.
The world has come a long way since the last time an indigenous financial service system was introduced. There is definitely a crying need to improve this traditional service and decentralized currencies like Bitcoin have shown them the way.
Although these are two different services and proper cyber security measures with their own shortcomings, if they were to be applied together, they could fit each other’s gaps perfectly, making for a system that revolutionizes the financial service system again.
People are often tempted to give unsolicited advice to others about the best way to manage finances. You’ll come across ideas that work and get you places, but often people are offering up such generalized advice. Trying to put together bits of information and use it in a meaningful way is not usually the best plan, as some of the information may be flawed and other parts confusing.
How can you take good care of your money and your finances so that you do not end up frittering away your savings on things you don’t need?
Generally, the problem is that most people lack a good understanding of just how important saving for the future is. Most people are going to do everything else with their money first before they even think about saving. Although saving in this way is better than not saving at all, it is in fact a highly ineffective way to build any kind of financial independence or security.
Managing Your Personal Finances
If you want to save money for the future, you’ll want these tips to help you on your plan. Many people who practice these methods are surprised at how easy they are to follow.
Simply set aside 20% of your paycheck.
Just reverse your spending and saving habits, instead of putting away your savings after you spent what you thought you needed from your income. Take 20 percent of your earnings first and put it towards savings before spending it all. Make sure to deposit this money as soon as you get paid. Whatever is left after the 20 percent has been saved can then go to paying bills, buying groceries and even getting yourself a new pair of shoes.
This method ensures that you’ll have the cash on hand that you need for your future and helps you to be more effective when you develop your budget. It’s a good feeling when you know that you have cash on hand for emergencies.
Keep Things Simple
There are too many people who are going to look at the latest gadgets and get wooed. You cannot let others around you dictate what you are doing with the money that is in hand. You want to buy the latest iPhone, but there is something you must ask yourself. Think about it, do you really need to spend the money on one?
Is there something in the newer model that is not there in your present one? There is no shame in being rewarded with luxurious items, but you need to keep it under control. You should never forego important expenses to purchase luxuries, and your twenty percent savings rule mustn’t be violated.
You Want Cash Over Credit
Don’t fall for fancy credit card marketing. So many people end up with huge debt due to starting to buy small items using their credit cards. It’s easy to get lured into the trap that a $50 purchase won’t wreak financial damage in the future because it can be paid off within the month. Actually, once the billing cycle rolls around, you are probably like most people who just pay the minimum amount of money towards the bill, making that $50 dress cost close to $100 in interest.