The end of the fiscal year will bring enormous pressure on the owners of businesses to prepare their accounting records so that they can comply with tax laws. It is, however, even more difficult to accomplish this without the relevant expertise and knowledge.
The problem is, not every small business owner knows the ins and outs of finance. When it comes to operating a small business, you need to know everything about handling your businesses’ money as it’s the key to surviving.
“Unfortunately there is no getting away from it, finance is the language of business and is critical to learn. When you first start your business it is easy to overlook as it might not feel like it is having the same impact as designing a new product, or closing a sale. But not taking the time to understand the fundamentals can compound and cost you millions and many headaches sooner than you think.” – Victor Tan is the CFO of MBH Corporation PLC and reviews hundreds of small businesses every single year as he looks to help them scale up.
So what about those who have trouble in financial management? Learning on the job can be harder because you’ll be under a lot more pressure. What do you need to know about finance when you have a small business?
In this guide, we’ll show you the fundamentals of finance that you’ll need to keep things running smoothly.
1. Practice bookkeeping
The importance of proper record keeping can’t be overstated. Keeping track of expenses and outlays is a tedious task, but it will give you a better understanding and greater control of your finances.
Even if you are working with a bookkeeper, you should take the time to review and monitor your books every week or month. This will help you gain a better understanding of the finances of your business and also have a window into potential financial crimes.
2. Don’t be afraid of loans
Loans can be intimidating because a failure to repay can lead to you worrying about financial consequences. On the other hand, it may be challenging to grow your team or purchase equipment without the help and capital that comes from loans. Furthermore, the loan proceeds can be used to boost the cash flow of your business so that you have fewer payment issues with suppliers and employees.
3. Learn more about your expenditures and ROI
It’s important to measure expenses and return on investment to determine which investments make sense and which aren’t. Deborah Sweeney, CEO of MyCorporation, stated that small business owners should be cautious about where they spend their money: “Focus on the ROI that comes with each of your expenditures. Not doing this means that you can lose money on irrelevant or bad spending bets. Know where you are spending your hard-earned dollars and how that investment is paying off. If it isn’t paying off, cut back and spend a bit more on the initiatives that do work for you and your business.”
It’s due to that reason why a lot of small businesses fail not long after they’re started, and that explains why it’s best to do these as soon as you can. If you don’t, your business can get into trouble.
Have you faced some issues in your business finances? Let us know what you think!