As Sain’s Chief Financial Officer, and with almost 30 years of experience in the accounting field, I’ve become the go-to guy on financial issues. Over the years, I’ve seen a lot when it comes to accounting and know that it’s a huge topic to tackle. As National Small Business Month comes to a close, below are five tips to help small businesses manage and achieve financial success:
- Have a formal budget: Many small businesses miss this step; however, it is one of the major keys to financial success. A formalized budget helps companies plan for all types of business expenses. Don’t forget to plan for professional licenses and taxes (income, property, state, local, and city). All these items are included in a budget and paid throughout the year.
- Taking on debt: Everyone talks about debt differently, and there are differing opinions, but there are two important things to consider when applying for loans or lines of credit. Will the debt help operate the business more efficiently? Lines of credit can be a good thing and help run the business more efficiently by smoothing out cash flow management, so don’t be afraid of taking on this type of debt. The other consideration for a loan would be buying assets. This type of debt is something to consider when purchasing assets to support or grow your business. The debt is normally paid off as your asset depreciates.
- Insurance issues: Corporate insurance (general liability or professional liability) is usually one of the biggest line items in any small business’ budget. Scheduling payments is critical. If your payment is due in August, will it be paid in one lump sum or over time?
- Anticipate everyday expenses: Some businesses do not plan for everyday expenses, but it is important to budget for daily expenses, especially when it comes to travel. Thinking ahead and planning for corporate travel will help you manage your budget more carefully.
- Better bookkeeping: Small businesses should keep up with expenses on a weekly basis and monitor them monthly or at least quarterly to ensure that the company will not go over budget. It is important to keep everything on track so that if something needs adjusting, it can be. In addition, it’s critical to characterize expenses as “fixed” or “variable.” If it’s fixed, you must pay it; if it is a variable expense like travel or office supplies, you can adjust.
Ultimately, it all comes down to having a formalized budget and keeping up with it throughout the year. The more closely you watch it, the easier it will be to handle any issues that may arise.