When small business owners want to know the secret to staying in business (profitably!), the answer is to keep planning ahead.
Cash flow is typically the biggest challenge for startups and small business owners. Being able to manage your cash flow to cover not just recurring costs but unexpected costs is essential.
To stay on top of cash flow:
- Track your recurring costs, so you know what funds you need to have (and when).
- Use budgeting strategies that help you meet your business goals.
- Analyze your bills carefully (always reconcile – overcharges or errors add up and you may see ways to save – for example, negotiating bulk pricing).
- Stay on top of accounts receivables so that your customers pay what they owe in a timely fashion.
- Each year, do some business forecasting to predict what you might face.
Some small businesses and startups encounter growth overwhelm. They’re fine until they grow to a certain point and then they struggle to cover expenses. Planning ahead to keep your business sustainable should include:
- Build a buffer for unforeseen expenses. What kinds of things affect the costs you need to pay to keep your business going. It might be something like rising gas prices affecting your shipping costs, or the price of lumber tripling and affecting your production line. Whatever circumstances could hit your business, you need to be prepared with ways to cover any potential extra costs.
- Give some serious thought to disaster preparedness. Some small businesses have been devastated by unpredictable natural disasters or family emergencies that affect their ability to lead and manage their business. Do you have a contingency fund? Insurance to cover situations?
- Stay on top of expenses and income. Keeping accurate and up-to-date accounting records is vital. It’s easy to put it off and intend to catch up later, but updating financials regularly is crucial.
(Pro tip: Hiring a skilled bookkeeper or outsourcing accounting can save you time and money! Here’s how to know when the time is right to outsource.)
- Get ready for tax season. Make sure that you prepare for your year-end. Do you know which deductions could reduce your tax bill? Have you reconciled your books?
- Embrace technology. The cloud accounting software available now can streamline many if not all of your business processes. Not only is it easier to stay on top of recording and reconciling transactions, you can use it to identify growth drivers and reduce mistakes.
Planning ahead is the best way to keep your business on track for success – and we’re here to help small business owners and startups. Contact Finatics Accounting Solutions for a free consultation.