Running a small business is a very rewarding but often stressful experience for every entrepreneur. Keeping up with the company’s finances is a task that doesn’t always cross an owner’s mind when first forming the business, but often, it becomes a huge part of their everyday jobs.
This demand can be greatly minimized by incorporating a few of these tips into your small company’s financial plan. Here’s where to start to clean up your financials.
• New year, new budget: Your budget is the financial roadmap for your small business and the easiest way to make sure you find yourself on track financially at the end of the year. What’s more, budgets should be sacrosanct for the duration of the year; once created, there should be no changes.
• Know your cash flow: This seems obvious, right? Still, for many small business owners, it can be anything but simple. Cash flow is the ultimate lifeblood of the business, especially for a small business. Take the time to manage your invoices, and make sure you are being paid on time, if at all.
If something comes up that affects your cash flow, deal with it immediately. Putting the problem off isn’t going to make it go away and can have devastating effects to the business.
• Set aside 10 minutes per day: One of the most important but overlooked ways to keep a handle on your firm’s finances is to force yourself to set aside 10 minutes (even 5 would do) to review and organize all bank statements, spending, receipts, and invoices from the day.
In addition to simple being a generally good financial practice, you will be surprised at how much you learn about your business in a short amount of time. Owners often get so wrapped up in the daily, technical aspects of running the company that they do not often notice where every dollar is truly going.
• Separate your business finances from your personal finances: Surely, you have heard this before, but are you actually taking part in this practice? By separating your business expenses from your personal expenses, you will greatly reduce your personal liability.
Do not combine business and personal expenses. Do not take cash out of the “till.” Your business will not be taken seriously or have legitimacy with bankers, financiers or even the government unless you have clean books.
• Hire a Pro: Small business owners aren’t expected to be an expert in the finance, accounting, and legal side of the business, which is why there are professionals like accountants, bankers and lawyers out there. Money spent wisely on a good CPA or lawyer will be returned in multiples of extra profit. And don’t forget, bankers are usually willing to provide extra education and counseling to small business owners.
Meeting frequently with these professionals will help you keep your finances in good shape throughout the year and alert you to any problems before they get out of hand.
Ken LaRoe is the founder, chairman and cheif executive of First GREEN Bank, a community bank headquartered in Mount Dora, Florida that promotes positive environmental and social responsibility.