You don't need to be a financial wizard to run a small business, but you do need to keep track of some basic financial functions. ...
You don't need to be a financial wizard to run a small business, but you do need to keep track of some basic financial functions. Starting from the day you begin preparing to open your business, set up a simple spreadsheet, either manually or with a software program, that will track:
- How much money you are spending on your business
- Who is receiving the money
- How much you are taking in from clients, products or services.
Brush up on basic financial termsBusiness finance has its own language, so as you launch or run your business, learn some basic terminology, from accounts payable and cash flow to LLC (limited liability corporation). Being armed with the right knowledge can help you do a better job of negotiating.
Write a business planEven if you've been planning for the launch of this business for years and have every detail in your head, it makes sense to write down your plan on paper, including the mission, your business model, possible competitors and threats, and your timetable for financial success.
Calculate start-up costsDetermine how much money you'll need to start your business by using a worksheet or workbook. You may think you have a handle on costs, but there are likely to be expenses you haven't figured in.
Set up a basic bookkeeping systemYou'll need to establish a basic bookkeeping system even before your business opens. A bookkeeping system records your financial transactions, including the money coming into and going out of your business.
Establish a relationship with the right bankDevelop a relationship with a local bank where you can get to know the small-business staff. Open a business checking account, and talk with a bank officer about the right type of account for your business. Decide if you want a separate business credit card and see if the bank has a small business package that includes a business credit card.
Hire an accountantA certified public accountant can help you with your finances, from setting up a bookkeeping system to calculating start-up costs to doing your taxes.
- Financial projections and a business plan are important, but they need not be lengthy. Two pages can suffice.
- Consider more than one bank for your business needs. Find the bank with the best business package or best loan. Don't overlook small local banks or savings and loans; just make sure they're insured with the FDIC or the FSLIC.
- When shopping for a loan, consider more than the interest rate. Pay attention to the length of the loan and the repayment.
- Don't be afraid to negotiate with your bank on the terms of your loan or credit line.
- In preparing your budget, add a 10 to 20 percent contingency line item for those costs you may not have anticipated.