Starting a small business can be very exciting in many ways. You get to be your own boss, make the shots, and decide in which ways you want to take your company to the next level. However, where there are good parts, there are also some hard parts that can be difficult to manage.
One of those is business finance management. More than 50% of small businesses fail within the first year. One of the reasons for that is that small business owners don’t know how to keep their finances healthy. If you’re struggling with this segment, you’ve come to the right place.
Start off with a business plan
The first step in starting any business should be to write up a business plan. This plan is an essential guide for all of the business decisions you will make in the future. And while there are multiple things you need to include in your business plan, one thing you shouldn’t forget to include is financial planning.
The financial aspect of your business plan will help you with the following:
- Budgeting and cash management. In your business plan, you can break down everything you will need in your short-term and long-term budgets. This will allow you to predict when you will have both low and high revenue periods.
- Prioritizing different expenditures. One of the keys to maintaining healthy finances is allocating your funds effectively. When you plan everything out, you will have a grasp on what expenses are more important than others.
- Measuring your progress. When you own a small business, you have too much on your plate to keep track of your progress. But when you look at the financial aspect of your business plan, you can easily see how far you’ve progressed and if you’re on the right track.
If you’ve never created a business plan before, you should use a business plan template that ensures you don’t miss any important detail. Make sure to find a template that has great reviews and has helped many businesses create a perfect plan. For example, you can check out Growthink reviews to see how their customers used their templates and their satisfaction.
Work with an accountant
Only 30% of small businesses have an external accountant, but that is a big mistake for multiple reasons. Accountants can be amazing business consultants and they can help you take care of your finances much better than you would by yourself.
Here are some of the reasons why you need to consider hiring an accountant:
- They can save you money. Good accountants know how to reduce your taxable income and claim tax deductions, help you operate expenses, and find cost-saving ideas everywhere.
- It’s a real time-saver. If you’re not well-versed in the financial aspects of a business, you will spend hours every day taking care of accounting and similar tasks. But if you hire an accountant, they can take care of the grueling part while you focus on more important issues.
- They help you stay compliant. There are a plethora of laws and regulations businesses must comply with, including various tax laws. A professional accountant will know all of the laws and help you stay compliant. This will keep you out of some big legal troubles.
To sum up, working with an accountant is a great way to ensure your business finances stay healthy. However, not every business can afford an accountant for all tasks. If nothing else, you should look into tax accountants and find one you think will fit into your business well.
Reduce debt as much as possible
New business owners are always thinking about how to get startup capital. And while that is important, you shouldn’t just focus on the money coming in. You also need to think about the money that is going out.
It’s much easier to fall into debt than some business owners realize. When the cash flow is low and you’re not paying close attention to how you’re spending your money, you will wrack up debt faster than you realize.
This is why you need to keep a close eye on your profit and loss statements to be well aware if you’re spending more than you’re earning. If you are, try to find ways to cut costs, communicate with your suppliers to see if they can offer discounts, and always look for ways to increase sales.
Don’t forget about personal finances
A lot of small business owners make the mistake of putting all of the money they make into the growth of the business without taking care of themselves.
While you should always think about growth and different ways you can improve your business, this shouldn’t be an excuse to neglect your personal finances. Save for retirement, open up a 401(k), and give yourself the same salary every month.
After all, having a successful business doesn’t mean anything if you don’t have enough money to survive and save some of it for a rainy day.
While you are undoubtedly passionate about the work you do, the underlying fact is that you want to make money with your small business. And to make money, you need to have healthy finances. That is exactly what you will have if you stick to the strategies you read about here.
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