Updated: Sep 27, 2022
There are several great resources online to help you find effective ways to manage your business finances. It may come as a surprise to you how complex financial management can get. Hopefully, the resources and advice found in this article can help you get started.
Separate Your Personal and Business Finances
Since the taxes for you and the business are calculated separately, it's necessary to open separate personal accounts designated for only business transactions.
Hire the Right People
If you want your business to thrive, it's vital to hire motivated, high-energy, trainable people looking for success rather than making a quick buck. As a small business owner, you need to know how to retain valuable employees by offering them perks such as flexible schedules, happy hours, and team-building activities."
This tip from the website, https://www.freshbooks.com/hub/leadership/small-business-management, applies to those who are hiring help for their business management. If this is you, you will want to check out more ways to keep employees! If you want people to work for you, you will have to make sure they are paid on time, every time, and that you are easy to work with. You don't want to make them feel like you are taking advantage of them, so make sure the pay is fair, and you have a good attitude when it comes to business. Even though this is your own business, you will always want to keep a friendly, professional attitude.
Let Go of Full Control
"The best small business management tip I have to give entrepreneurs is to let go. More specifically, let go of control over things you're not good at. For me, I'm not too fond of accounting. However, I viewed getting a bookkeeper as a waste of money for the first year in business because I could do all of the work myself. I quickly realized that I don't enjoy bookkeeping, and time could better spend time building the business overplaying its accountant. Do what you're the best at, and lean on others to help you with things you don't like to do."
— Jordan Scheltgen, Managing Partner at Cave Social
"Quality financial management offers many benefits to you as a business owner. Financial management includes bookkeeping, projections, financial statements, and financing, forming the foundation for reaching your goals through sound business decisions. Financial management is one of your main avenues to success as a business owner. Financial management is the way you know if you are making a profit. Financial management helps you decide what you can afford in store or office location, inventory purchases, employees, and equipment. You need good financial information to set your prices and select your vendors. Financial management gives you the tools to plan for overall business growth, diversify your product lines, or reach new markets. Financial management helps you decide which products, services, and markets are profitable. Effective financial management gives you tools to chart your course into the future, adjust your direction when needed, and help you find your way through challenging times. If your business growth requires financing (loans), financial management provides the information to know how much you can afford for your business. Financial management gives you not only the documentation needed for a loan application but also helps you discuss your business circumstances with a lender in terms that improve your ability to qualify for the loan."
This website is a great way to get started with your business finances.
Here are some steps you can take to prepare for a loan. Have a business plan (including a profit plan): The best way to get a loan is to have a solid plan for using the loan. Ensure you have an excellent up-to-date business plan that incorporates a profit plan. A profit plan will show how the loan proceeds will increase sales and profitability. Showing a lender a reasonable proposition with a solid repayment plan will also help. Your goal should include any research to establish your costs and marketing or sales strategies.
Your plan should include a repayment plan with projections that show your ability to make your monthly loan payment. Study your financial statements: As mentioned earlier, a lender will want to see your financial information. Not only do you need to provide accurate current and historical reports, but you also need to know what your comments say about your business. Be prepared to discuss the details of your statements and explain any issues. Check your credit report: You can get a free copy of your credit report from each of the three major credit bureaus every 12 months. Study your credit report, make sure it is accurate, fix any inaccuracies, and be prepared to explain any credit issues. Establish collateral options: Be ready to discuss collateral with lenders.
When purchasing a fixed asset, the asset is often the collateral for the loan. Lines of credit are sometimes unsecured if a business owner can show a strong history of profitability. Still, it is not uncommon to use personal assets to collateralize a business loan. Show your equity contribution: Lenders usually require an equity contribution for a start-up loan or a loan for an expansion project. The required cash contribution can range from 10 to 30 percent of the total project costs. Research your financing options: You will need to choose between many lenders and many types of loans. Research your options to ensure you obtain financing from credible sources. Loan packages require a lot of preparation and documentation. Here is a list to get you started: Business plan: Most lenders require a business plan that describes your costs and your management and sales strategies."
It may be a good idea to take out a business loan, depending on how your business is going. You can always refer back to your business plan for reference when making decisions about your financial loan options.
If you've hired a financial manager for your business, they may even be able to help you plan your finances as well. Depending on their experience, this may be something they are comfortable with.