Business owners need to know more than their bottom line.
Entrepreneurs are required to wear many hats as they establish new businesses. In addition to tackling legal and business organization concerns, they are also the marketing, sales and sometimes the front-line workers as well. The financial aspects of a business can be foreign to many of these entrepreneurs, including technical experts whose main focus is the product or service they offer.
Accounting and Bookkeeping
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In order to properly track ongoing income and expenses, business owners need to establish good accounting practices from the start. Entrepreneurs can purchase established software packages to set up accounting ledgers, invoice clients and even pay employees. Websites such as Nolo.com provide articles and how-to guides with basic information on such topics as cash basis versus accrual accounting, and track revenues and expenses.
Basic Budgeting
Creating a basic budget can be difficult, especially if a business owner has never before owned a business or taken finance courses. Without available benchmarks on expected income or expenses, entrepreneurs may face difficulties in budgeting proposed expenditures. SCORE is a volunteer organization that provides small- business counseling and training resources to new business owners. The resources provided come in the form of in-person seminars, online webinars, budget templates and even individual counseling. Business owners have access to experienced professionals to develop their initial business plans.
Financial Reporting
Lenders want to see your cash flow before committing to lending you money.
Financial reporting is a term often associated with large companies and investment managers. Small-business owners use financial reporting to show potential lenders and investors how successful their business is in meeting financial commitments, and provides an overview of cash flow. In order to understand the importance of these reports, business owners can tap into information provided by the United States Small Business Administration (SBA). The SBA works locally and nationally to provide entrepreneurs the basics on getting loans and attracting potential investors. The SBA even offers the opportunity for certain entrepreneurs to apply for SBA-sponsored loan funding. Contact the SBA for specific loan criteria and guidelines.
Financial Audit
Small businesses of all size should address their internal financial controls as they grow in order to avoid external audits. Good business finance practices such as how cash is handled, who is authorized to approve purchases and who is responsible for balancing the checkbook are necessary to help ensure the business' financial viability and avoid increased audit exposure. There are several free online checklists to help owners and managers decide on best practices for their business.
