To coin it simply, Financial Discipline is all about how well you can manage your expenses and manage to save whilst keeping the ultimate goals in mind.
If you are someone who’s looking to become an entrepreneur or getting into a serious business, managing finances and keeping a vigil on it may seem like a task and this is something that several business owners fail to pay attention to.
An individual/entrepreneur or a company that knows everything about its finances and the way it’s being earned and spent is likely to outshine and activate its goals sooner and in the right manner. This always prep-up the entity for the worst times coming ahead because you have a clarity as to where the money has been invested and from where the money can be pulled out in times of financial crisis.
While everyone must be maintaining financial discipline throughout their lives, it’s more important for businesses and organizations to have financial discipline in order to be able to manage their funds. Business Owners, Executives Managers, Operational Resources Teams should be more vigilant in terms of how the money is being spent as this might help the company or the organization in the long run.
Absence of financial discipline and not having a plan in place could be tough and would put you in a situation where you will not be able to manage your earnings, expenses and will end up having no control on the same.
Also, understand the difference between urgency and necessity. If you genuinely need something then only buy it otherwise drop out the non-essentials. There is no need to buy two phones a year, that watch you’ve been eyeing for long or shopping at the mall. If you are someone who intends to maintain financial discipline, you need to save money and not splurge at this stage.
Sometimes you might also end up spending more than what is required. The absence of having a plan in place doesn’t restrain you from spending money mindlessly.
Let’s walk you through the Importance and Key points to maintain Financial Discipline.
Start early and keep a watch
Start early and embed the culture of financial discipline. Be it at home or work, having early control on your expenses gives you the luxury of time to experiment, correct your mistakes and work towards long term goals.
If you are someone who is the owner and leads the company, make sure the financial details are not restricted to the finance department alone. You too have a hold on it.
Making a list of your long term goals, the budget you have for a project and your expenses should go hand in hand. This will give you a clear picture and will help you to be financially more disciplined.
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Helps you have a control
Having a financial plan helps you to have an outline and automatically puts a restriction as to how much you can spend and how much money you have to reinvest in your venture.
Financial Discipline will only come when you have the willingness and dedication to stick around and follow the financial plan that you have constructed for yourself. This may not help immediately but the benefits will reflect in the long term.
No unplanned Expenditure-
Every business or someone who’s running the show as a homeowner must make a fixed and restricted expenditure budget for their business and home. This would not be tempted to make any unplanned expenditure.
As you will already have each of the major expenditures in place and budgeted there will be no scope for uncertainty. This would ensure that the habit of planned expenditure is inculcated in our business and therefore there is no wasteful expenditure of the business.
Also read: Key highlights of Budget speech 2022-23
Not a child’s game
Following financial discipline is not easy as it may seem to follow, especially in a business setting. 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.
Track and analyze
Make a note of almost all the expenses, be it big or small. Prepare a sheet and think of ways and measures to cut it down.
One of the initial steps towards maintaining financial discipline could be your understanding, analyzing your expenses and tracking down all of them.
You need a thorough analysis of where a major chunk of your money is being spent. Understand if it’s really necessary and tame it down if need be.
Improve efficiency, helps achieve targets
When your expenses and funds are being managed properly and directly by you it automatically becomes a professionally managed approach. This helps you have your road map ready and know what lies in the pipeline. This also means that going ahead there would hardly be any scope for alteration in plan.
While preparing the estimates of expenditure it is mandatory that we make the goals of your turnover also.