You can't run a business well without managing your budget and keeping an eye on the bottom line. A new business in particular needs to make sure that cash is flowing in and profits are sustainable to stay in it for the long term.
Financial Basics for the Business Owner
When you're just starting out, you need to have a financial plan with clear goals for profit. This is especially true if you intend to look for financing as most banks will want to know that you have a clear idea of where you're headed and some financial acumen. A good business plan starts with a realistic budget for your income and expenses.
Finding Funding for Your Business
Some businesses can be started with minimal costs but otherwise require an investment that you may not have on hand. There are many sources of funding for businesses, such as the Small Business Administration and private grants for women-owned businesses. Seasonal loans are an option if you have a business that has income that fluctuates based on the time of year. You may have to find ways to be creative with your financing which could include relying on credit cards although there are risks to doing so.
If financing is a critical part of your business plan, you'll need to establish credit in order to get a loan. Your business will need its own credit score and the credit will be reviewed prior to any loan approval decision. You may find that the bank rejects your loan if you can't establish credit but may allow the use of secured business credit cards. They may also refer you to other options such as private or government loans.
Tracking Financial Data
Running regular reports on your business' financial health shouldn't be neglected. Knowing how to prepare a profit-and-loss statement can help you see a snapshot of how profitable your business is and where you might need to adjust. You may also find that you need to do a better job of bringing money in and finding good invoicing software can make this process more efficient and will improve your cash flow. You can also use all this data to create your year-end reports for investors and help inform your accountant of possible tax strategies to save you money.
Know Your Finances
Any truly successful business owner will tell you that knowing your financial position at all times is critical to sustaining your growth. You don't want to ignore the financial realities of your business and find yourself suddenly faced with the prospect of bankruptcy. Running a business requires you to wear many hats, and it's wise to seek out professional accounting and finance help if you feel you need more education and support in this area.