What you should know about business finance

Managing the finances of your business is the foundation of making it successful. However, many business owners let themselves get caught up in the day to day running of their business and fail to pay attention to what their business is spending and bringing in. This can be a serious mistake. Studies show that most failed businesses go under due to lack of management of business finances. This is true even when the business had successful numbers when it came to sales. This makes learning all you can about business finances crucial. Here is what you should know about business finance-

- Start at the beginning-Most likely your introduction to business finance will come when you are trying to find funding to start your business. It can be a difficult process to determine just how much money you will need to start your new business. In fact, many prospective business owners seriously underestimate just how much money they will need. This can seriously hamper your business from getting off the ground and growing. It is important to understand that start up funding can come from many different sources. Business owners should make sure that they educate themselves about all possible venues for business financing. You should also make sure that you have a very good idea of just how much it will cost to start your business. You want to have concrete numbers to offer any potential lender. Vague guesses or estimates will not inspire confidence on the part of the lender that you can successfully start, run, and grow your business.
- Write a budget-There is a common misconception on the part of many business owners that they don't need a business budget. This is a serious mistake. Just like having a personal budget to manage your finances your business needs a budget, as well. Having a business budget will give you a concrete idea of what is being spent, what is coming in, and how well you are managing your cash flow. In addition, you can use your business budget to set financial goals for your business. When your budget and your financial goals are connected you are not only are more likely to stick to your business budget but you are far more likely to achieve your business financial goals. It is important to keep in mind however, that a business budget is a dynamic document which means that it may need to grow and change as your business does.
- Keep your personal and business finances separate-A basic rule of good business finance is to always keep your business and your personal finances separate. You should never co-mingle the two different types of finances. This can only create a paperwork nightmare especially when it comes time to pay taxes. In addition, keeping your personal and business finances separate can also offer some legal protection even if your business is not incorporated. Whatever accounts you open for your business (banking, credit cards, loans etc.); they should all be taken out in the name of your business. This is also important for the fact that it allows you to begin building credit for your business. Finally, keeping your business and personal finances separate shows the IRS that you are serious business concern.
- Develop a relationship with your banker-It is shortsighted to think that your banker is only good for lending your business money. Bankers can do far more for businesses then simply give business loans. Your banker most likely knows of other resources that can be highly beneficial for your business. Developing a relationship with your banker can give you access to those resources that can help you grow and develop your business.