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Financial Preparation for small business

Posted by ledgerbench on April 24th, 2020

Starting a small business is a dream for many people. Unfortunately, half of the people’s business shuts in between due to lack of finance preparation or there can be multiple other reasons. 

Have you heard this famous proverb? 

“The Art Is Not In Making Money, But In Keeping It.”

Financial Preparation

We know how to start a business, but managing finances can be a key challenge. 

  • Talk to a tax expert:

It’s imp ortant to work with an Accountant before starting a business- to understand ramifications of all transactions. A good CPA can make life so much easier by handling taxes, payroll, tax filing and other financial

  • Figure out funding for the business:

Funding for the business is the biggest decision aspiring business owners need to make. If you have savings and you don’t require funding/loan from a third person then you are better off using your own investment. But if taking a loan is the only option you have, then make sure you can repay it.

  • Pay yourself:

Many small business owners neglect to pay themselves. They believe paying others in the business and spending money for business operations is a major component than paying themselves. But what if the business is not running in profit. You fail to compensate  yourself as much as others need it to. Obviously, you want to ensure your company and your personal finances are in good shape.

  • Invest in growth:

It’s important to set some money aside and invest for the growth of your company. Customers appreciate a new level of service. This will create more value for your business and move your business in a healthy financial direction.

  • Having a good billing strategy:

Every business has a client who is late in payments or invoices. Managing business finances also means managing cash flow to ensure your business is operating properly on a day to day basis. Too many unpaid invoices can lead to cash flow problems and ultimately business failure. Offer some kind of incentive for the late paying customers such as 2% discount paying on time etc. This will help in managing cash flow of the business.

  • Plan for the future:

There will always be business issues that can be addressed on a daily basis but when it comes to finances, you need to plan for the future. You have to think short term and long term to stay in the cut-throat competition.

  • Don’t discount the little things:

The little things such as envelopes, letterheads, business cards, technology needs etc should not be ignored. Think about the office supplies from the view of administrative staff. Take the cost of these  things into the account as they are more significant expenses.

  • Maximize your liquidity:

It’s important to have detailed calculations to ensure you have reserves to continue your business even during unforeseen times.

  • Get Online:

It’s very important to have a website in this new technology driven world. If you won’t create a website you are creating a big mistake. You can clearly communicate your services through this online channel. Customers really want to see how things work with a business.

  • Monitor your books:

It is an important practice. Spare some time to monitor and review your books of accounts even if you have a bookkeeper. It will enlighten you regarding your business finances and help you make decisions. Also keep in mind to do reconciliations. 

Conclusion:

Staying organized is an important component in managing sound money for your business.

Reference URL - https://ledgerbench.blogspot.com/2020/04/financial-preparation-for-small-business.html

Also See: Small Business, Financial Preparation, Cash Flow, Managing Cash, Business, Financial, Small

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