Month: April 2019

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Develop an understanding of the importance of a financial strategy when venturing into a business. Bear in mind that going into business is not just about making profit from an innovative product or idea.

Making profit is merely the goal, while the money infused as capital to build the business is the foundation. Money is invested to acquire assets to use in selling an innovation whether as a product or as a form of service. It is therefore pertinent to have a financial strategy on how to make vested money and profit yields work toward building a sound financial condition for the business.

It is not wise to let a business run without having any business financial plan integrated as part of management processes. Simply going where the business flow takes you is a flimsy business finance strategy. Mainly because this is a hit-and-miss stance which could find your business drifting while waiting for a lucky break, or eventually veer away from what you originally perceived as your business mission.

Example of a Business Finance Strategy

We have established beforehand that the main goal of operating a business and of investing seed money into a business is to generate profit. If you are a startup venturer, it is best to keep your profit making goals in proportion to your seed capital. Avoid aiming for big profits by entering into get-rich-quick methods or by way of unfair trading practices. Such methods may work at first, but will eventually backfire on you.

A business finance strategy is incorporated as part of a business plan. In a detailed manner, the strategy specifies how cash that is available on hand will be allocated and used in running the business.

Establishment of a Working Capital Fund

An example of a business finance strategy is one that establishes a Working Capital fund. The fund must be placed in a deposit account in order to segregate money purely for operational purposes. Other liquid capital funds must be allotted for investing on a major additional asset, or for the settlement of current liabilities or long term-obligation in a planned manner.

The next strategy is to implement a system of projecting cash flows for each month, as a way of earmarking Working Capital funds. That way money collected from business operations, flowing in as additional working capital fund will only represent increments. At the end of a cash flow period, any amount exceeding the original balance of the Working Capital Fund will immediately identify the operating period as a growth month.

On the other hand, if at the end of the period the Working Capital Fund is less than the original balance, then a deficit occurred. This denotes that business operations for the month did not bring in enough cash to cover the expenditures for the period, let alone generate potential increments to the capital funds.

In such cases the Working Capital fund requires replenishment, but a review of the cash receipts, expenses and other disbursements must be performed to ensure propriety and validity of transactions that resulted to a deficit.

You must have certainly heard about digital currencies or what is known these days as cryptocurrencies. Bitcoins, Peercoins, and others are becoming more and more popular in the marketplace. Statista says that there are more than 1400 Bitcoin ATM all over the world. Cryptocurrency is also becoming a trend in many online deals for various industries.

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As we are entering another decade of this digital era, the financial industry will continue to revolutionize and make a huge change in the way we deal with our transactions and savings. We are almost in the era of cashless transactions as we embrace electronic and digital currencies.

Let’s take a look at the professionals’ point of view on the impact of digital currencies in the financial landscape in the years to come.

1. Inexpensive International Money Transfers

Digital currencies are a huge help for international money transfers. Many people can take advantage of bitcoins to receive or send money internationally. This bypasses expensive foreign exchange services of banks and other payment processors.

2. Better Security To Protect Digital Currencies

At present, it’s unfortunate that a few of us lost money in online transactions. Regardless of how small or big the amount of lost, financial technology will move to develop a stronger, more secure system to protect digital money and digital transactions.

3. Alternate Currency Reserve (In Volatile Economies)

Digital currency is relatively new thus it is less stable when compared to currencies such as the EUR and USD. However in several nations susceptible to inflation like Venezuela, their digital currency, bitcoin is in more ways stable compared to their own national currency. As a result, it’s no surprise that the use of Bitcoin in Venezuela has expanded almost seven times at the start of the year.

4. Efficiency – Faster, Easier, And More Secure Payments

Digital currencies make payments faster, simpler and even more secure. Because of efficiency when using digital currencies, this could impact how banking institutions work. Banks should commence using the concept of digital currency.

5. Market Transparency

Digital currencies lead to changing the conventional way of doing business. People who use digital currencies appreciate market transparency. The availability of public ledger creates transparency for all users. For this reason, there is a big chance that traditional transactions will go down while digital currencies will continue to rise and may take over the financial system.

6. Cryptocurrency Empowers The People

Cryptocurrencies will be less complicated due to lesser intermediation. With this new structure, the cryptocurrency code will set the rules. Bank personnel that took advantage of the system their own personal profit will eventually suffer a loss from their misdeeds. This revised financial structure eliminates the banking institutions as the middle person and gives more power and flexibility to the people.

7. Possibilities of One World Currency

We are moving towards global conglomerate that digital currency could become a currency for the entire world having the same value regardless of the country and removes expensive currency exchange rate as we know today.

Digital currencies as we know today serves a lot of benefit to many users. Although it is not yet widely accepted by the general public, the vision that most finance professionals are looking at could be possible. In fact, we have started way back then when financial technology had been introduced starting with credit cards and ATM machines.

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