Money Management is the allocation of income toward spending categories such as savings, taxes, insurance, investments, credit, and cash (Masha Ksendzova et al 2017).
Money management is the process of expense tracking, investing, budgeting, banking and evaluating taxes of one's money which is also called investment management (google.com).
This also includes securing investments for projects. Money management is taking control of money we earn or spend towards leading an independent life (Nurul Syuhada et al 2017).
Money is how we keep score in business.
It's not your self worth. It's not your value as a human being. But money is the life blood of a business. Same as you need fuel to drive a car, money enables you to get things done.
Budgeting, financial planning, book keeping & accounting are tough. Misuse of funds, failing to project cashflow & expenses or 101 other shortcomings can bleed your business dry. Or worse yet, hitting the home run deal you've worked so hard to get.. Only to be hit with a giant tax bill from neglecting your money management habits.
It's important you work with a professional. Check google for an expert you trust, or listen to some of our podcast interviews.
Understanding Your Financial Statements
Money management is an essential part of any and every business. After all, cash is king — you can’t run a business without funding. You’ll need to allocate income, track expenses, invest and budget, and manage finances and investments.
Every business owner needs to understand their financial statements. Financial statements are formal records of a company’s financial activities. These plans provide the current landscape of your business and forecast its future. They also help attract investors and lenders so you could gain the resources you need to operate and grow your business.
Here are the three main financial statements, what they tell you, and how to make them.
Income statement: The income statement shows the performance of the business — such as revenues, expenses, income, or loss — throughout a specific period. First, figure out your sales revenue. Deduct the cost of goods sold to find the gross profit. The gross profit is also affected by other operating expenses and income, which will help you reach net income or the bottom line. This is used to assess business profitability.
Balance sheet: The balance sheet displays the assets, liabilities, and shareholder equity during a specific time period. List all your assets on the left side of the page and your liabilities on the right. Then, total your assets and liabilities then subtract your liabilities from your assets. The amount left is called owner equity. This financial statement shows the financial position of your business.
Cash flow statement:The cash flow statement shows the inflows and outflows of cash. It includes operating, investing and financing activities. Take the net income and adjust it for any non cash expenses. Then, use the changes in the balance sheet to obtain usage and receipt of cash. It also shows the ending balance during a period. Cash flow statements show cash increase and decrease.
If you want to manage and track your finances, it would be beneficial to create a sales forecast and budget your expenses. You should also find your breakeven point. Once you have finances under control, you can use your financial statements to see how your business operates, if you are doing well or poorly, and how to manage your business and cash efficiently.