This is what you need to know
The hardest part of starting a business from scratch is money allocation and finance management. Start-up small businesses need to save funds for rainy days, but they also need money to purchase equipment, hire human resource, purchase software applications, buy materials from suppliers, invest in advertising, the list of expenses is never ending.
To survive the increasing competition in today’s volatile economy, along with preventing insolvency or worse, liquidation, small businesses need to streamline their financial processes from the very first day.
If you are starting a new business, have a look at our top 5 finance tips.
1. Automate Your Accounting Processes
You can hire a personal accountant for your business. A cost-effective solution is to get a cloud-based accounting application that not only automates your accounting processes, but also forecasts financial calculations. Many small businesses use cloud-based applications to minimise their workload and forecast the outcome of their investments. This way, a cloud-based software application can become your financial advisor and virtual accountant.
2. Ensure That Funds for Your Company are 100 per cent Safe
Resourcing funds for your business is one of the toughest decisions you will have to make in your entrepreneurial career. What happens when your funds are unsafe? The creditors may pressure you to pay the instalments and even go to court for issuing orders of liquidation. Entrepreneurs need to remember that bankruptcy stays on their credit report for up to seven years.
You need to make sure that the funds you get for starting your small business are 100 per cent safe. You can choose from different financing options such as crowdfunding, commercial business loans, P2P lending, etc. For this, you need advanced market research and contacts in the industry to get a perfect deal for your business, and make sure that you can run your business for years without financial pressure. The best way to do this is by hiring the services of professional financial advisors. One example that I found to be useful is https://www.companyfundingoptions.co.uk/who provide free funding advice to growing businesses who need it. These professionals have multiple industry contacts and can bring you the best possible deal. They research the market for you and even give you suggestions for increasing your profits from the very first day.
3. Streamline Cash Management: Track and Monitor
Cash-flow management is necessary for ensuring the survival of your business in the market and to keep your business running smoothly. It not only indicates the current financial condition of your business, but can also help in identifying potential risks.Cash-flow management includes:
- Managing receivable accounts for cash inflow
- Managing payable accounts for cash outflow
- Preparing a financial contingency plan to cope with financial emergencies
- Preparing a crisis management plan to pull your business out from financial emergencies
Cash management also includes financial tracking and monitoring. Make sure to maintain proper records, save enough money for emergencies and control over-trading.
4. Obtain Credit Reports Regularly
Various small businesses obtain the benefits of credit-based spending and end up drowning in debt. Maintaining a good credit score is necessary for keeping your business on track and getting approved for business loans. Your credit report reflects the performance of your business which can be translated into future investments.
5. Keep Your Balance Sheet Updated
The insolvency test is determined based on your cash-flow and balance sheet. In some cases, the cash-flow insolvency test is dissolved, but the balance sheet insolvency test is applicable in all types of liquidation cases. Simply put, the stability of your business is often judged by the balance sheet as it can provide a clear overview of your assets and liabilities.
Initially, it is important to keep updating your balance sheet daily. Once your business is established, you can look over and update your balance sheet weekly. Keep track of your expenses, available assets and liabilities, and allocate adequate finances for reducing liabilities and increasing assets.
However, the most important tip is to stay optimistic and hopeful while remaining vigilant throughout your start-up process. You should also be prepared to face the worst scenario, insolvency and liquidation.
Once you have established your business, you can seek small investment options such as getting a Roth IRA account or micro-investing your money. You can also purchase shares in established businesses to secure financial backup.
Fund allocation as investment requires careful understanding of the market. You can get assistance from finance and investment experts on your investments. Many businesses consider hiring a finance expert as an extra expense. However, it is a kind of investment that can ensure long-term profits for your newly started business.
Want to be more digitally savvy and grow your business online?
Complete our 30 second survey and receive our FREE guide here