How to manage your small business finances
Managing your small business finances is just like anything else. You must have a plan as to what you want to accomplish. Many small business owners overlook the need to carefully have a plan on how to manage their finances. The bottom line is that failing to have a plan, in regards to any aspect of your business can be serious, failing to have a plan on how to manage your business finances, can literally bring about its downfall. In today's economy it has become crucial, for small businesses to have a tight hold over their finances. The finances problems of years past, that could just be ignored must now be dealt with immediately, to avoid serious ramifications. It is important to understand that your small business' finances are the underpinnings of your business's strength; as they go, so goes the business. There are several important steps you can take to manage your business finances. Here are a few of them-
- Take the time to prepare a complete business budget-Many small business owners have the mistaken assumption that business budgets are not needed or are simply a waste of time. But the bottom line about budgets is that they work. It is important to take the time to develop a working financial budget for your business. Then you will need to follow through by, looking at it every day, consulting it, following it, and making adjustments. Keep in mind that if you are unsure of where to start when writing a business budget, there is plenty of help online, or you can ask your accountant.
- Always keep your personal and business finances separate-It is crucial to understand that a business bank account is absolutely necessary, for good business record management. You need to get a separate business bank account, and make sure you use it only for business purposes. It is important to understand that the cost of a business bank account is nothing, compared to the time and trouble you might end up spending, trying to untangle your books, or figure out a paper trail, if you were ever audited. Most importantly, this has the added effect of showing everyone, from your customers, to the IRS that your business is a serious concern.
- Look for problems and then solve them quickly-There are three common small business problems that even a quick analysis can reveal are. Once the problem or problems, have been identified then a solution needs to put in place immediately to help the business' finances. These problems are-
1. The business is carrying too much debt-If this is the problem then you must determine where, why and how the debt is being carried. Steps to solve this can include: refinancing current debt, paying off debt and looking for ways to streamline the use of debt.
2. The business is carrying too much inventory-This becomes a problem since inventory is just cash setting in your warehouse or office. You must take steps to free up the cash you need. Whether this means discounting inventory or even donating it (remember that it costs to store it as well), you must resolve your inventory problem in order to successfully manage your small business finances.
3. There are problems collecting accounts receivable-If this is a problem within your small business, then a dedicated effort to collect accounts receivables must be put into place. In addition, a new credit policy should be considered that limits credit to late payers.
- Recognize that you may need professional help-It is important to realize that an accountant's main job is not doing the books, but providing you with the business and tax advice, that you need to manage and grow your business. If you are unsure of where to find one, ask family, friends or other business owners about recommendations.