Financial management is a balancing act, especially for new small businesses. From opening bank accounts to balancing the books, there is a lot to learn in a short period of time. However, it is possible to put your business on the path to financial stability if you follow a few simple tips.
1) Educate Yourself about Financial Management
Before you begin financial planning, you will need to develop your financial literacy. For example, a financial statement reveals everything you need to know about your business’ income and expenses in four parts:
- cash flow statement
- income statement
- balance sheet
- statement of shareholders’ equity
The financial statement displays where your money went, where your income came from and how much money you have now in an easily understandable format. Small business owners who have a greater understanding of the basics of financial management often are the ones who become more profitable.
2) Separate Personal and Business Finances
After you have launched your company, you must separate your personal and business finances to remain compliant with the IRS. You will need to open a business bank account, apply for a business credit card and document any personal expenses which are incurred on behalf of the company. Once you separate your finances, you will be able to avoid any confusion about money and be able to better track your company’s income and expenses.
3) Your Time is Money
Although it’s common for small business owners to dedicate themselves to growing their business, it’s possible to overdo it. In addition to how this may affect your personal life, it’s important to remember that your time is worth money, too. If you are working 80 hours a week, your business may not actually be as profitable or stable as you might think.
4) Monitor and Measure Financial Performance
It’s also important to monitor and measure your company’s financial performance. By examining your financial statements every month or quarter, you will be able to assess your business’ financial health. For example, you might notice that more of your income is received during a specific week or month of the year. Over time, you will gain the ability to recognize financial trends that will allow you to make adjustments to your business model.
5) Hire Professional Accounting Help
Financial management requires time, energy and discipline. If you do not have the time to regularly monitor your finances, you may want to consider hiring professional accounting help. A tax accountant can help you assess your business’ current financial situation, where it is headed and how it can get there.
If your business is looking to become more financially stable, choose a local tax professional that specializes in helping small businesses make sense of today’s complex tax code.