The Truth About Small Business Finances In 3 Minutes
Do you own a small business? In these challenging economic times, you may be suffering from additional cash flow pressures. Have you considered financial credit counselling?
A lot of small business owners face similar predicaments. They are fantastic at promoting their services and are often experts in their field, but very few of them know enough about finance to run a business properly.
All business owners should be able to produce a profit and loss account, a cash flow statement and a balance sheet. I am not suggesting that you become an accountant or a bookkeeper but unless you fully understand these basic accountancy principles you run the risk of letting your business fail.
Yes, you can employ people to do these tasks for you, and this is an excellent idea as I am a firm believer in playing to your strengths. BUT you still need to understand and know how to read a set of accounts. Otherwise, you could find yourself the victim of fraud. As the business owner, you are ultimately responsible for filing the correct forms and tax returns. The tax department will not accept any excuses including the fact that you let your accountant handle things. So protect yourself by educating yourself on the basics of business finance.
Getting professional help can so you can learn how to manage your business finances. They will advise on the best place to hold cash investments, how much to keep on instant access banking facilities and how much they could afford to tie up for a while. They can also help find the best deals on any form of credit your business may need be it a business loan, short-term cash flow injection or factoring of your debtor’s book.
Getting someone to review your company accounts and give you advice on how you are handling your debtors and creditors. As often small business owners will extend credit for too long, and this can hurt your cash flow. Also the longer the debts are outstanding, the more risk there is of them not being repaid in full. Your counsellor will be able to advise you on how best to offer credit terms without risking losing your customers or your income.
Your business finances should always be kept entirely separate from your finances even if the business itself is a sole trader as opposed to a separate legal entity. Steer clear of any commercial credit counselling service which tries to manage your personal affairs as well. You want their expertise on the business side, but it would be better to have someone who is an expert on personal finance manages your own money.
Check the prices and quality of services on offer at your local firm. Ask your business contacts for recommendations, i.e. who do they use for their commercial credit counselling services and why. Suggestions are often the best way of finding experts who can help you make the most of your business.