In a hyper-competitive market, being a small business owner is harder than ever. Throw in the management of financials, and many entrepreneurs are lost. Just having a great idea is not enough to grow and thrive.
Entrepreneurs with little or no experience in finance desperately need to educate themselves.
At Freedom Financial Network, we’ve seen small businesses rise and falter. We know that it takes quite a bit of expertise to manage the financials of a company. We made this guide to help small business owners manage their finances.
Get Familiar with Financial Statements
Financial statements tell you everything you need to know about a business. They include a cash flow statement, income statement and balance sheet. These three components contain vital information regarding how the company is financed, what assets and liabilities they have, and revenue within a certain timeframe.
Keep Business and Personal Accounts Separate
It’s best to open a separate credit card for business expenses. Otherwise, by mixing your personal and business financials, it’ll be hard to get a clear picture of the business and it will create a difficult situation on Tax Day. Freedom Financial Network has seen the effects of poor account management on small business owners on Tax Day. The unexpected expense can be a significant hardship.
Also note that personal loans to your business must be tracked. This money can be repaid when the business starts to become profitable.
Being on a business trip is not an excuse to spend exorbitant amounts of money on accommodations. Consider online options such as video conferences rather than traveling long distances. Always search for alternatives to save money. Leasing an office space rather than owning could save money and make expanding in the future easier.
Invest in Help
Freedom Financial Network has seen many entrepreneurs gain value from investing in their financial department. You don’t need to be an expert in everything to be a successful business owner. Sometimes, hiring an expert is the best decision.
If finances are your weak spot, a financial analyst can come in and steady the ship. If you can’t afford a full-time analyst, consider hiring someone part time. Cloud-based accounting software is also something to consider. There are free downloadable options, but they don’t offer the same benefits as the premium versions.
Cloud-based accounting software makes it easy to maintain a relationship with vendors and distributors and makes errors as clear as day. The investment in good software will save you over the long run.
Stay Involved and On Top
As the business owner, it’s important to continue monitoring performance over the short and long term. Comparing how your business is doing today versus how it was doing in the past will be key in making decisions on the direction moving forward. Be proactive with finances. Freedom Financial Network recommends imagining worst case scenarios and making sure you have allocated enough capital to survive those potential hardships.
Freedom Financial Network knows being a small business owner requires wearing many hats. Don’t underestimate the importance of your business financials. Take charge so you can build the business you want.