The key ingredient for a successful business is financial discipline.
When it comes to business, managing finance is a huge task that sometimes companies fail to pay attention to. A company that manages its finances well and knows where its money is going and coming from is likely to achieve its goals and objectives sooner and is well prepared for the worst scenarios as well.
If you don’t have a financial discipline and plan then it would be tough for you to manage your expenses. And sometimes you might spend more than what is required. Since you didn’t prepare any plan to follow and do not have any restrictions you would be spending as much as you want.
So, a financial plan tells you how much you can spend and how much money you have to invest again in your business. And Financial discipline is the willingness you have to follow the financial plan that you have made. Having financial discipline and cutting down extra expenses will not give you the result immediately but will help you in the long run.
Having financial discipline not only lets you spend your money only when necessary but also helps you to use the money you have in your hand most efficiently so that you would be prepared to run the company with minimal expenditure and end up getting more revenue. So it’s a win-win.
What is Financial Discipline?
Financial Discipline in simple words is just how well you can manage your expenses and manage to save as well as keeping your goals in mind. It’s all about making good use of the money that you have earned and investing it wisely for the company. It is done to reduce future problems and prevent risks.
Financial discipline is when you are in control of the money you are spending in your business. That is, you know how much money is going from you and how much you are getting as well. Financial discipline is spending and investing your money in the right way without making any unnecessary expenses. It’s simply having control of the money you have.
Supposedly, if you are an impulsive person and are likely to spend all your profit buying more stuff and equipment for your company without thinking about its pros and cons. And you are someone who spends everything without contemplating whether it is really necessary or not then that is when financial discipline saves you.
It shows you your goals, your expenditures, your income and revenue and keeps you aware of your finances and makes you be in control of the money you are spending.
But maintaining financial discipline is not easy as it sounds in the business. Because when it comes to a business every day you will be spending money to keep it going. One way or the other the money will be going from you. So at that time instead of ignoring the small purchases, you have to make note of the expenses and the purchases you are making.
Financial Discipline includes Contracts, Profitability, Vendor payments, Receivable Management, Expenses, Purchases.
Why an Entrepreneur Needs Financial Discipline?
For any business or organization financial discipline is a must-have. Every entrepreneur needs a financial plan to strategize their growth and to increase their profit and meet their goals.
And an entrepreneur needs financial discipline for these top two reasons. That is.
1. To Survive
As an entrepreneur, you will be facing a lot of ups and downs in the initial stage of your brand. So, practising financial discipline from the start will help you in becoming financially stable at first. And then you can invest your money in more valuable equipment and hire more labourers.
2. To Maintain Positive Cash Flow
Maintaining cash flow is a very important aspect of any business. When you spend and work according to the financial budget you have planned and stick to it your cash flow will be the same. And this indeed will help you in emergency expenses later.
How to Include Financial Discipline?
At the Organizational Level, there are certain ways through which you can include financial discipline. You can do this by.
Preparing a list of your goals, your budget for the project and your expenses will give you a clear picture and will help you be more disciplined. Make sure to note all the expenses, be they small or huge. And also note down expenses that remain unchanged every month.
After that, note down all the extra unnecessary expenses that have been made. And think of ways to cut down those.
3. Measuring and Working Accordingly
Analyze your expenses and track down all of them. Figure out where most of your money is going and think of ways to control it and make changes wherever necessary.
Who Should Follow the Financial Discipline?
Everyone. Literally, Everyone. Although when it comes to businesses and organizations financial discipline is very important to manage their funds. Business Owners, Executives Managers, Operational Resources Teams should be more in control of financial discipline in an organization.
Tips for Financial Control
- Start early, build the culture. Starting early gives you a lot of time to experiment, make mistakes and learn to be financially disciplined.
- Assign responsibilities to define processes and then ensure adherence to the same.
- Make financial discipline an integral part of the work, not a finance department lead scrutiny.
- Implement a robust ERP system, promote reporting through the system. Manual reporting erodes the value of the system.
- Make your team appreciate the financial implications of their daily decisions.
- Make external stakeholders like CA and Bank partners in your efforts to inculcate Financial Discipline.
- Get the guidance of a financial planner.
Meet the Experts for More Support
Udyami Helpline is an MSME education and advisory platform. Udyami Helpline connects you with experienced and professional financial advisors & industry experts to help you in all aspects of the enterprise’s financial complications. For expert consultation, contact at www.udyamihelpline.com/contact-us or write at firstname.lastname@example.org