Eighty percent of employees are employed by small businesses. This shows that small businesses are a great contributor to the economy. Many small businesses struggle to stay afloat and an even smaller number are able to remain in the black.
Many small business owners wear several hats which causes them to neglect tracking their business finances. They often neglect basic financial tasks that come back to haunt them in the future. Other small business owners wait until the end of the year to start organizing their business finances which can cause them to miss out of deductions and tax credits.
Small business owners have to be more diligent in properly tracking the business finances because they are more susceptible to economic conditions such as the recession and government shutdown which takes longer to recover from. Financial problems consume valuable time and business resources. Small businesses must utilize resources available to maintain the financial health of their business. Utilize these steps to help get your business financial house in order.
Focus on targeted advertisements for your niche market. Use social media for free and avoid using the paid advertising packages. Hire a public relations (PR) firm to help get the word out about your business. If you cannot afford a PR firm or a publicist learn how to become your own PR agent. Perform research and learn where your customers are and target your advertising efforts in those areas. Avoid using advertisements that are based on numbers, sales or website traffic such as Pay per click campaigns. These are a waste of money if you are not an expert in working with these types of campaigns.
Ensure you create the basic documents to track your business finances. Setup a cash flow statement to show cash coming in and cash going out during the year, where the money is coming from and how it is being spent. Setup a profit and loss statement which is a summary of business assets over a period time, provides revenue and expenses. It also shows how fast you are spending money and how fast you are earning money. Setup an income statement which summarizes how profitable the business is over a period of time. Compare data to make business decisions about pricing of products and services. Setup a balance sheet which summarizes company assets, liabilities and the equity. It also shows how the company is doing at a specific period of time.
PreparationReview business successes and failures to develop a strategic plan for the New Year. Increase sales and marketing efforts to help generate revenue. Perform strategic planning to partner with individuals and organizations that align with your company goals and objectives. Do everything with excellence. Be the best business owner you can be including providing exceptional customer service. This will help you transition from a small business owner to a business owner.
Make it easy for consumers to purchase goods or services and make it easy to collect late payments to ensure a continuous flow of cash in your business. Use software to track and record accounts payable and accounts receivables. Develop policies to support your business processes. Hire a third party to assist you with collecting unpaid invoices.
Use resources such as SCORE or the Small Business Administration to get funding, expert advice and sample forms and documents to help you effectively start and maintain your business. Hire a lawyer that specializes in working with small businesses to help minimize legal action.
It is critical that business owners keep business and personal finances separate. This reduces liability, provides easier tracking and maintenance of funds, provides straightforward filing of taxes and provides simpler detection of business tax credits and deductions. It makes the business more attractive to investors because when you keep good financial records you can show the value of your business and proves that your business is legitimate. It helps when applying for business funding, and helps build a business identity through payments and a credit history. A balanced budget business should consist of no more than 40% of your income spent on business expenses resulting in 60% profit.
Not all tax preparers are certified public accountants and may not be knowledgeable about the tax codes and frequent changes to the tax codes. Hire an accountant to prepare your taxes to ensure you do not miss out on any deductions or credit and to minimize tax penalties. Organize all receipts and deductions into one folder or file for easy access when it’s time to file your taxes. Keep tax records and receipts to capture all your deductions and expenses. Start creating Schedule C reports for your accountant. Update accounts receivable logs, accounts payable logs and assets logs which are helpful when filing taxes.
Harrine Freeman is a Financial Expert and Coach is the CEO of H.E. Freeman Enterprises, a financial services company for clients aged 30-55. She has worked with couples, homeowners, business owners, politicians and celebrities to help them achieve their financial goals. She has appeared in numerous media outlets such as Huffington Post. She is the author of the book, How to Get Out of Debt: Get an “A” Credit Rating for Free. Learn more about Harrine and how to use the money you have to get what you want by visiting her website hefreemanenterprises.com.