For many small to medium-sized businesses, finance is a major problem. In the early days of the company, finance was simple: pay bills, take stock, make mortgage payments, and so forth. As the company grew and became more successful, finance became complex, particularly when employees began to take part in business. Today, finance problems can result in a company going out of business or a company being bought by someone else.
It’s never too early to start managing your company’s finances, although it’s never too late. If you need help with your finances, a financial advisor may be able to help. In some cases, however, the problem will be more difficult, if not impossible, to fix without outside help. Debt financing for small companies generally means debt payment along with interest, while venture capital funds often provide seed money for new ventures that mean investing in areas other than manufacturing or construction. This column is intended for business owners seeking guidance on how to better manage their company’s finances.
One way for small business owners to stay on top of finances is to maintain an accounting system. When doing so, keep the following guidelines in mind: Don’t try to do too much at once; keep records simple; and develop good money management skills. While it’s usually best to keep your records as simple as possible (and to avoid creating more financial information than is needed), there are a number of ways to create and maintain complicated financial information systems, such as invoices, bill payment histories, balance sheet information, etc. The most important thing for small business owners to remember is that in order to run a properly organized organization, they must follow the rules laid out in “Guiding Principles for Corporate Finance,” which is available from the American Institute of Certified Public Accountants (AICPA).
Small business owners who receive bills each day-or even several times a day-need to understand how and where their money goes. This becomes very important if a company receives a large bill, such as for a new office equipment purchase. Before accepting any invoice, it’s important to know exactly where the money came from and how it’s being used to accomplish the purchase. By following this same strategy for handling expenses, any financial problems encountered with cash flow will be easily resolved.
A second key takeaway for managing small business finances is to develop good spending and income planning habits. Almost everyone has some idea of how they spend their money, but developing good spending habits can make a big difference in how much money a family makes in a year. So before taking on any debt, be sure to first develop a spending plan. Also, a good money management plan will make it easier to identify where any extra monies are going.
Perhaps, the most important tip for staying organized comes from the most unlikely place: your bank account! Many business owners fail to recognize that maintaining an organized bank record can be one of the best ways to stay on track with their finances. Most banks require that all account balances are maintained on paper, which makes it easy for all concerned to see where all monies are going. This simple habit will go far beyond simple accounting practices. It will go a long way toward making your business credit more secure and improving cash flow.
Another step to creating a more financially stable financial future is to set financial goals. Whether it’s writing out a monthly budget or having a pen and paper tallying every transaction, setting financial goals is an essential part of any serious attempt to achieve a more stable financial future. Without clearly defined financial goals, it’s hard to know what will get done and what will stay put. However, when all goals are set, individuals can move forward with building a solid personal finance regime that will help them meet all of their financial obligations.
Finally, many business owners find that it’s often best to leave their cash management practices in the hands of professionals. There are many reputable financial management firms available in every area. Businesses may want to start by searching for local managers through the business reviews in newspapers and online. After finding the right fit, business owners should work with the company to develop an individualized spending plan that is designed to meet their particular spending needs and still leave room for future growth and expansion. From there, small business credit specialists can take over the monitoring and the reviewing of individual expenses and individual credit accounts to ensure that money is being wisely spent.