A Guide to Managing Small Business Finances


A Guide to Managing Small Business Finances
A Guide to Managing Small Business Finances
Spread the love

We’ve put together a guide to help you manage your small business finances, from creating a cashflow statement to 4 of the most important documents you need to keep accurate and useful records of your business’s finances.

Small Business Cashflow

Make a cashflow forecast and statement

Create a simple document that records all of the cash which is coming in and out of your business as well as a forecast for these figures. This will help you to see clearly how your business’s cash flow is actually doing so that you can plan accordingly.

Consider your payment terms

Whether you’re taking payments immediately or opting to offer credit to clients on a buy no pay later scheme, you need to work out how your business will function. If you want to offer credit to build trust then you will need to closely examine how your business will be able to affor to run between the sale and the payment.

Additionally, consider strategies to combat late payments, as late payments are one of the biggest factors in cashflow problems for businesses.

The basics of small business accounting

Open a separate business bank account

Every limited company is required by law to have their own separate business bank account. Even if you are a sole trader who is not required by law to have a separate business account, it is highly recommended due to the convenience of having all of your business incomings and outgoings collected in the one place.

Use accounting software and professionals

Gone are the days of doing all of your accounting on paper or even on an excel document. Nowadays, one of the best ways to manage your accounts, especially if you don’t want to fork out the money for an accountant, is to make use of cloud accounting software.

See also  Top Logistics Companies In India & How To Choose One

This is easy to use finance software that can help you keep track of your business’s finances as you grow and is often used by accuonting professionals as well as by business owners.

As your business gets bigger and you get busier, you will have less and less time to get through all of your accounting well. To keep on top of things, consider hiring an accountant to make sure everything you process is accurate and on time.

An accountant can also be extremely helpful to make sure you are doing everything right in the event of a compliance audit. Working with an accountant or a compliance consultant is a great way to ensure that your business is performing correctly and following all of the proper procedure and guidelines.

Planning and forecasting your finances

When it comes to the planning and forecasting the finances for your small business, there are four main documents you need to keep a track of. These will help you not just keep on top of your finances but also be able to plan and identify any potential issues before they arise and help you to make better informed decisions about the direction of your business. These four documents are:

  1. Balance Sheet: A balance sheet is a snapshot look at your business’s finances at any given time. It is made up of three parts: Your assets, liabilities and equity. A positive number on your balance sheet indicates a business that is doing well, and can be a useful tool to show banks or potential investors exactly how your business is doing and how it is being financed.
  2. Profit and Loss Statement: Your profit and loss statement is a summary of all the incoming and outgoing finances your business has experienced over the year. This will allow you to calculate net profits or losses, which in turn can help you to take an accurate measurement of how your business is performing over time. A profit and loss statement will also help you to identify your business’s breakeven point, which is the amount of money that you need to make to cover your company’s expenses.
  3. Cashflow statement: A cashflow statement is a useful document which can show the flow of revenue your business has experienced over a given period, usually either for a quarter or a month. This helps you to see clearly whether the business has enough cash at all times to cover day-to-day costs and identify any problems.
  4. Breakeven analysis: Your breakeven analysis is a part of your profit and loss statement, but important enough that it gets its own point too. A breakeven analysis is the document used to work out exactly how much money you need to make or how many units you will have to sell to cover all of your costs and break even. Of course, when a business is first launched it is quite usual to make a loss, however if a business continues to make losses then there is likely a problem which needs to be identified and rectified. 
See also  "Written From" The Up and Coming Platform For Travel and Culture

Spread the love

Scoopearth Team
Hi This is the the Admin Profile of Scoopearth. Scoopearth is a well known Digital Media Platform. We share Very Authentic and Meaningful information related to start-ups, technology, Digital Marketing, Business, Finance and Many more. Note : You Can Mail us at [email protected] for any further Queries.